The MediaOne/AT&T Merger and Application for Change in Control
On July 13, 1999, AT&T submitted an application (FCC Form 394) for approval of a change in control to the 175 cities and towns in Massachusetts that had granted cable television licenses to MediaOne According to federal and state laws, as well as individual franchise agreements, the Issuing Authorities must hold hearings to determine whether to approve the proposed transfer Regulations from the Division mandated that all 175 towns conduct these hearings regarding the cable license transfer within sixty days of AT&T's application date.
1999 filing In response to these unique circumstances, the Division agreed, to
AT&T/MediaOne's request to conduct optional regional hearings throughout the
Commonwealth for the benefit of the subject cities and towns.
Regional Hearings
The Division announced to all 175 communities that it has approved AT&T/MediaOne's request for regional hearings, which are currently being scheduled It specified that eleven regional hearings will be conducted, and emphasized that each issuing authority, including those involved in the hearings, must ultimately take these discussions into account.
The Appellees highlight the absence of any reference to the source of the Division's authority to schedule regional hearings, which are intended to replace individual hearings Additionally, they emphasize the need for the Division to independently evaluate and decide on the approval of the transfer For further details, refer to Cable Division Transfer Bulletin 99-4 (June 28, 199), included as Exhibit A.
Charles J Beard was appointed as the Special Magistrate for eleven regional hearings by the Division After these hearings concluded, he produced a twenty-page Summary of Proceedings and Magistrate's Report, which was dated September.
On June 28, 1999, the Division issued a Transfer Bulletin, which prompted the Magistrate's Report dated 24, 1999 This report presents a series of non-binding findings and recommendations addressing the specified issues outlined in the bulletin For further details, refer to the Magistrate's Report, attached as Exhibit B.
Magistrate Beard emphasized a narrow interpretation of the four criteria outlined in 207 CMR 4.04, which assess a transferee's management experience, technical expertise, financial capability, and legal ability to operate a cable system under the current license Notably, he recognized that this limited interpretation was grounded in Division regulations and decisions that had not been contested in any court within the Commonwealth.
Magistrate Beard firmly acknowledged the importance of what he characterized as
"public policy" issues in the context of the transfer of MediaOne's cable television monopoly to AT&T The Magistrate's Report states, in pertinent part:
The transfer of MediaOne's licenses to AT&T represents a significant event in Massachusetts, distinct from the numerous license transfers previously recorded in the Commonwealth This marks the first time a major and diversified company like AT&T, with ambitious plans for revolutionizing cable service delivery, has aimed to enter the Massachusetts cable market.
The transfer prompts significant public policy inquiries, as my role involves assisting cities and towns in evaluating AT&T's legal capacity, management experience, technical expertise, and financial resources to meet all obligations associated with the MediaOne licenses.
The Magistrate's Report highlights the significance of the open access debate as a critical public policy issue Magistrate Beard emphasized its immense importance, noting that extensive testimony on the subject was provided during various regional hearings, which was subsequently summarized in the report.
Magistrate Beard acknowledged that his authority to make recommendations after the regional hearings was limited; however, he emphasized that AT&T's acquisition of cable monopolies in Massachusetts is a significant event with substantial public policy implications Central to this discussion is the issue of open access.
AT&T/MediaOne Presented Its Open Access Position In Public Hearings
Despite Magistrate Beard's proposed limitations on public hearing scopes, the topic of open access emerged as a significant focus for the affected towns In at least eight of the eleven hearings, residents and representatives from various issuing authorities voiced concerns about open access Throughout these discussions, participants raised critical questions regarding the Road Runner service provided by MediaOne, highlighting the importance of this issue in the deliberations.
5 See Boxford Regional Hearing (August 4, 1999) at 44-45; Barnstable Regional Hearing (August 9, 1999) at
59, 69; Newton Regional Hearing (August 10, 1999) at 51-52, 64; Springfield Regional Hearing (August 11,
1999) at 42; Malden Regional Hearing (August 31, 1999) at 36, 59-61; Foxboro Regional Hearing
On September 2, 1999, at pages 67-69, and during the Burlington Regional Hearing on September 8, 1999, at page 151, as well as the Weymouth Regional Hearing on September 9, 1999, at page 63, concerns were raised regarding the provision of services by a certain provider It was noted that the current approach could suppress competition and hinder the expansion of broadband services.
Despite Magistrate Beard's belief that his review was limited and did not allow for consideration of the open access issue, the hearings specifically addressed the legal implications of a closed system Testimony from various authorities, consumer groups, and other stakeholders indicated that the exclusive partnership between AT&T and the MediaOne Road Runner service posed anti-competitive risks and could face antitrust challenges Additionally, ongoing litigation in Portland, Oregon regarding open access was frequently mentioned, along with open access ordinances enacted in Broward County, Florida.
AT&T's submission to the Canadian Radio-television and Telecommunications Commission (CRTC) emphasized the importance of an open access directive, highlighting the negative effects of a closed system on competition.
Cable operators and local telephone companies wield substantial market power due to their control over essential broadband access facilities and their dominance in core business markets.
Anti-competitive behavior can emerge in various forms, such as offering broadband access services at prices below cost in certain markets to eliminate competition from other providers Additionally, in uncontested markets, pricing services above cost can generate profits that are used to subsidize other offerings.
Discriminatory practices in broadcast access services, including unfair terms and conditions and the refusal to unbundle essential components, create disadvantages for competing service providers in downstream markets.
In summary, the hearings featured significant discussions regarding the anti-competitive implications of the proposed license control transfer, despite Magistrate Beard's assertion that the open access issue was not directly related to the four criteria outlined in 207 CMR 4.04 AT&T played an active role in this debate, often initiating key conversations.
During the hearings, significant discussions highlighted the negative impact of a closed system on public interest, as noted by Magistrate Beard, who described the debates as "frequently vigorous, sometimes contentious." This intensity prompted AT&T to deliver a special presentation addressing the 'open access' issue Throughout the hearings, AT&T not only elaborated on its stance regarding open access but also introduced a panel of experts for a formal presentation on the topic.
7 See Weymouth Regional Hearing at 95-96 quoting Comments of AT&T Canada Long Distance Services
The Issuing Authorities' Hearings and Decisions
The City of Cambridge
On August 19, 1999, a public hearing was conducted in Cambridge, led by City Manager Robert Healy, to discuss AT&T's transfer request in accordance with 207 CMR 4.00 Mr Healy announced that the public would have the opportunity to submit comments until September 10, 1999, ensuring community engagement in the decision-making process.
During the meeting, the Appellants articulated their perspective on the "open access" debate, while also addressing MediaOne's non-compliance with the License Agreement.
As City Manager, Mr Healy was tasked with determining the approval of the transfer request He carefully evaluated the information presented during the meeting and ensured that no decision was made before the public hearing comment period concluded.
As City Manager, Mr Healy stated that any approval of AT&T's request would depend on several conditions, including compliance with the License, demonstration of necessary management experience, and ensuring non-discriminatory access to its broadband system for other ISPs He continued negotiations with AT&T after the public comment period, emphasizing that approval would require a commitment to open access This is detailed in Mr Healy's correspondence dated October 20, 1999, included as composite Exhibit E.
In its submission to the Division, AT&T mischaracterizes a subsequent City
On August 19, the City of Cambridge conducted a legally required public hearing, keeping the record open for three weeks for additional public comments AT&T's reference to a City Council meeting was simply an update from the City Manager regarding the license transfer status The Issuing Authority made its decision on November 10, 1999, after multiple attempts to obtain sufficient assurance from the transferee regarding compliance with the existing license, management experience, and equitable access for other ISPs Therefore, Cambridge adhered to all relevant laws concerning the transfer decision and procedures, as detailed in the attached Cambridge Decision.
The City of Quincy
On November 10, 1999, the City of Quincy issued a written decision regarding AT&T's FCC Form 394 request, referred to as the "Quincy Decision," which is attached as Exhibit F.
The Quincy Decision endorses the transfer of the cable license from MediaOne to AT&T, influenced by the recommendations in the Magistrate's Report and the assurances made by both companies during regional public hearings Furthermore, Quincy’s approval of AT&T's FCC Form 394 request is explicitly conditional on AT&T ensuring nondiscriminatory access to its cable system for any requesting Internet service provider, under terms that are at least as favorable as existing conditions.
Quincy facilitated a direct dialogue between AT&T and city officials, allowing for discussions on the open access issue During a City Council meeting, councilors unanimously passed a resolution supporting open access initiatives.
The Town of North Andover
On November 10, 1999, the Town of North Andover issued a written decision regarding AT&T's FCC Form 394 request, referred to as the "North Andover Decision." This decision was also shared with the Division, and a copy is included as composite Exhibit G.
On August 12, 1999, representatives from North Andover participated in a regional hearing in Lowell regarding AT&T's transfer request Following the hearing and additional communications with MediaOne, North Andover approved the transfer contingent upon five conditions: no increase in subscriber rates due to the transfer, full compliance by AT&T with the North Andover Renewal License terms, resolution of specific compliance issues outlined in the North Andover Decision, provision of nondiscriminatory access to AT&T's cable modem platform for unaffiliated internet and online service providers, and payment of all applicable taxes to the town.
The City of Somerville
On November 10, 1999, the City of Somerville issued a written decision regarding AT&T's FCC Form 394 request, known as the "Somerville Decision." This decision was subsequently shared with the Division, ensuring that all relevant parties were informed.
Decision is attached hereto as composite Exhibit H.
Representatives from Somerville attended a public hearing hosted by the Division in Malden, Massachusetts, where they reviewed evidence related to open access for Internet service providers via cable television lines MediaOne addressed Somerville's concerns regarding open access by directly communicating with the city, ensuring that their issues were acknowledged and responded to effectively.
Somerville denied AT&T's transfer request See Somerville Denial Letter dated November 10, 1999 attached as Exhibit H Among the reasons set forth in the Somerville Decision are the following:
Somerville's review indicates that AT&T, as the transferee, lacks the necessary experience and technical expertise in cable television management The analysis concluded that AT&T's absence of direct operational experience with municipal cable systems renders the transfer inappropriate.
Somerville rejected AT&T's plea that it would obtain or gain an appropriate level of municipal cable television experience by employing or otherwise relying upon
MediaOne employees lacked the necessary management and technical expertise for the Somerville cable system, which ultimately did not benefit the local cable subscribers As a result, AT&T's reliance on MediaOne's experience and technical capabilities was justifiably dismissed.
Somerville has requested guidance from the FCC regarding high-speed Internet service In response, MediaOne indicated that it needs to reevaluate the launch date for this service in Somerville.
Somerville emphasized that AT&T's denial of nondiscriminatory access to its high-speed cable modem Internet platform creates a significant legal obstacle for fostering a free and competitive market for high-speed data services He identified AT&T's stance on this crucial public policy matter as a potential anti-trust violation that he cannot accept or support.
The Appellants filed appeals of the North Andover and Quincy Decisions on November 23, 1999 The Appellants filed their appeal in the Cambridge matter on
On November 29, 1999, the Appellants submitted their appeal of the Somerville Decision on December 3, 1999 The Issuing Authorities requested extensions on December 1, 1999, to respond to the Appellants' motions for summary decision, seeking to extend the deadline for filing responsive briefs and materials until December 10, 1999 The Appellants agreed to this extension.
The Issuing Authorities have requested the Division to consolidate hearings for the related cases due to shared legal and factual issues Additionally, they have filed a memorandum opposing the Appellee's motions for expedited proceedings.
T HE O PEN A CCESS I SSUE I S C ENTRAL T O T HESE A PPEALS
A Open Access on Broadband - This is the Way
Open access mandates that cable companies provide non-affiliated Internet Service Providers (ISPs) with equal access to broadband cable customers Recently, cable companies have launched cable modem services that enable high-speed Internet access without the need for a telephone connection However, these companies, including MediaOne and AT&T, have not allowed customers to choose their preferred ISP, instead forcing them to accept the Internet service offered as part of a bundled package.
In Massachusetts, customers seeking broadband service are compelled to subscribe to the captive Road Runner ISP, owned by MediaOne, as part of a "closed access" system established by MediaOne/AT&T This model requires consumers to pay for both the ISP services controlled by the cable company and an additional fee for their preferred ISP, leading to increased costs The implications of such a closed access system are detrimental to competition, resulting in higher prices, reduced consumer choice, hindered innovation, and limitations on the free flow of information and electronic commerce.
B The Importance Of Open Access In The Current Cable Debate
The ongoing debate over open access is intensifying, particularly due to AT&T's refusal to fully embrace it, leading to litigation across the country The situation has been likened to "trench warfare," but AT&T is aggressively working to undermine the open access discussion to protect its growing monopoly on high-speed internet and cable telephone services, fueled by its rapid acquisition of cable operators Their recent public support for open access lacks a legally binding commitment, rendering it ineffective and prompting authorities to withhold approval Consequently, Massachusetts has a pivotal opportunity to influence this vital issue, as AT&T's stance could adversely affect millions of consumers and numerous internet service providers and businesses in the state.
The open access debate transcends the profit motives of major ISPs such as AOL and Mindspring, highlighting its significance for the broader Internet community's public interest.
Proponents of open access across the nation include organizations such as the National Association of Counties, Center for Media Education, Consumer Federation of America, Consumers Union, Media Access Project, OMB Watch, and the OpenNET Coalition, which represents over 900 independent ISP and technology companies.
Cambridge, North Andover, Quincy and Somerville to the list.
Over 2.5 million individuals, representing about 42.1% of households in Massachusetts, have internet access The state is home to around 55 independent internet service providers (ISPs), in addition to nearly 400 ISPs from outside Massachusetts that offer connectivity services.
Massachusetts homes and residents Internet service providers and related companies provide tens of thousands of jobs to Massachusetts residents
The open access issue is crucial for the future of Internet services in this state, making it highly relevant to this proceeding.
C Denial of Open Access Is Harmful to Robust Competition
Open Access on Broadband - This is the Way
Open access mandates that cable companies provide non-affiliated Internet Service Providers (ISPs) with fair access to broadband cable customers Recently, cable companies have launched cable modem services that deliver high-speed Internet without the need for a telephone connection However, these companies, including MediaOne and AT&T, restrict customers from choosing their preferred ISP, instead forcing them to accept bundled Internet services provided by the cable company.
In Massachusetts, customers seeking broadband service are forced to subscribe to the MediaOne-owned Road Runner ISP, creating a "closed access" system This setup requires consumers to pay for both the cable company's services and an additional ISP of their choice, leading to higher costs, reduced competition, limited consumer options, and hindered innovation Consequently, this system restricts the free flow of information and electronic commerce.
The Importance Of Open Access In The Current Cable Debate
The ongoing debate over open access, intensified by AT&T's refusal to fully embrace it, is being litigated nationwide, with Appellants likening the situation to "trench warfare." AT&T's aggressive strategy aims to stifle the open access discussion, which threatens its growing monopoly on high-speed Internet and cable telephone services, bolstered by its rapid acquisition of cable operators While AT&T has publicly acknowledged open access, this gesture lacks a legally binding commitment, rendering it ineffective and prompting Issuing Authorities to deny AT&T access Consequently, Massachusetts holds a pivotal role in influencing this crucial issue, as AT&T's stance could adversely affect millions of consumers and numerous Internet service providers and businesses in the state.
The debate surrounding open access extends beyond the profit motives of major ISPs such as AOL and Mindspring; it also significantly impacts the broader Internet community's interests.
Prominent advocates for open access across the nation include the National Association of Counties, the Center for Media Education, the Consumer Federation of America, Consumers Union, the Media Access Project, OMB Watch, and the OpenNET Coalition, which comprises over 900 independent internet service providers and technology firms.
Cambridge, North Andover, Quincy and Somerville to the list.
Over 2.5 million individuals, representing around 42.1% of households in Massachusetts, have access to the internet The state is home to about 55 independent internet service providers (ISPs), along with an additional 400 ISPs from outside the Commonwealth that offer their services to residents.
Massachusetts homes and residents Internet service providers and related companies provide tens of thousands of jobs to Massachusetts residents
The open access issue is crucial for the future of Internet services in this state and is highly relevant to this proceeding.
Denial of Open Access Is Harmful to Robust Competition
Restrictions on consumers' choice of Internet Service Providers (ISPs) lead to diminished competition, resulting in slower growth and reduced innovation on the Internet The lack of robust competition, particularly from open access, allows cable companies like AT&T/MediaOne to exert significant control over content and access Therefore, the open access issue is a vital public policy concern for local authorities The federal government has delegated the authority to review competition issues related to cable license transfers to local authorities.
The ongoing debate over open access should not be misconstrued as an attempt to regulate the Internet, as suggested by entrenched cable companies and AT&T; rather, it highlights the need to address anti-competitive practices that benefit AT&T financially Open access is not synonymous with free access; it simply calls for equitable conditions that allow Internet Service Providers (ISPs) to compete fairly by gaining access to broadband cable networks under the same terms that cable companies extend to their own affiliated ISPs.
The Portland Litigation
The recent ruling by the United States District Court for the District of Oregon affirmed the authority of local governments to impose open access requirements, as demonstrated in the case of AT&T v City of Portland The court found that such requirements are not preempted by federal cable regulations and do not infringe upon the First Amendment, Commerce Clause, or Contract Clause of the U.S Constitution, nor do they violate the Oregon Constitution or existing franchise agreements This decision underscores the relevance of open access as a legitimate consideration for local authorities, challenging any claims by Appellants that it is an insignificant issue.
AT&T's Recent Commitment To "Open Access"
AT&T's December 6 Promise to the FCC
On December 6, 1999, AT&T communicated with FCC Chairman William E Kennard, expressing its intention to eventually provide open access to unaffiliated ISPs This letter emerged from discussions involving AT&T, Mindspring, Excite@Home, a local official, the Media Access Project, and the Mayor of Atlanta However, the Media Access Project withdrew from the talks due to significant concerns regarding AT&T's stance, and the Mayor of Atlanta did not participate in the letter Attached as composite Exhibit J are copies of AT&T's letter and responses from Mindspring and the Media Access Project, both dated the same day.
In a letter dated December 6, 1999, AT&T assured the FCC that it would implement its own version of "open access" for Internet Service Providers (ISPs) around mid-2002, although the details of this commitment remain somewhat unclear.
the ability to exercise a choice of ISPs without having to subscribe to any other ISPs service (i.e paying for MediaOne's captive Road Runner ISP and the consumer's ISP of choice);
a choice of Internet connections at different speeds and prices;
control over "start pages" and other aspects of the consumer's Internet experience;
functions on the high speed modem that are, to the extent technically feasible, comparable to those available on other high speed connections.
AT&T has committed to negotiating open access contracts with independent ISPs, which will take effect once current exclusive agreements expire Additionally, AT&T will ensure that independent ISPs receive necessary support and resources to enhance their operations.
Internet transport services for high speed access at "reasonably comparable" prices to those offered to other ISPs for similar services;
the opportunity to market directly to consumers using AT&T's Internet broadband network;
the opportunity to bill customers directly;
the opportunity to differentiate service offerings to consumers.
AT&T's commitment to the FCC marks a significant advancement, acknowledging that open access is essential for the continued evolution of the Internet However, it is important to note that AT&T does not fully guarantee genuine open access at its core.
AT&T is introducing "open access lite," a controlled version of open access that allows the company to dictate the terms and timeline, effectively maintaining the status quo for over two years.
As set forth in the letters of Dave Baker of MindSpring and Andrew Jay
Schwartzman of Media Access Project, AT&T's promise to the FCC does not commit AT&T to a truly "open" path on its broadband network for independent ISPs As noted by
AT&T's commitment to open access is commendable; however, it will only be implemented after their exclusive agreements with affiliated companies like Excite@Home, which are set to expire in mid-2002 Although the letter of intent indicates that AT&T will not favor affiliated ISPs over unaffiliated ones, there remains a concern that they may still impose restrictions, such as limitations on video streaming or IP telephony, affecting all users on their network.
Baker correspondence, December 6, 1999 attached as composite Exhibit J.
AT&T's recent letter to the FCC signals a shift in its stance on "open access," prompted by unsuccessful litigation in Portland and ongoing challenges to its "closed access" approach This retreat from its previous defenses during public hearings suggests that AT&T is recognizing the inevitability of open access Consequently, the Division should conduct a comprehensive evidentiary hearing to assess the merits of the Issuing Authorities' decisions, thereby upholding their choice to mandate open access for AT&T.
AT&T Should Not Be Permitted To Dictate the Timeline
AT&T has committed to transitioning its broadband Internet network to open access following the end of exclusive contracts with certain ISPs, as detailed in the attached correspondence (Exhibit J) In a letter to the FCC dated December 6, AT&T stated its intention to adhere to specific open access principles once these exclusive agreements are no longer in effect The exclusive contracts mentioned likely pertain to AT&T's relationship with the nationwide ISP Excite@Home and its potential ownership of the Road Runner ISP in Massachusetts.
AT&T's exclusive agreements are set to expire around mid-2002, yet the company has not disclosed its 58% ownership of Excite@Home in its communication with the FCC Following its merger with MediaOne, AT&T is expected to gain control over the Road Runner ISP in Massachusetts, making its exclusive relationships effectively self-deals This commitment to the FCC appears to be a strategy to delay the opening of AT&T's broadband network for two years or more, allowing the company to navigate public scrutiny regarding its growing broadband monopoly There is a consensus that AT&T could quickly provide open access without violating its existing contracts with its owned entities Allowing AT&T to postpone access for independent ISPs would enable it to circumvent its own pledge to eliminate barriers to nondiscriminatory broadband access.
The Summary Decision Standard Has Not Been Met
The Appellants are requesting a summary decision from the Division, arguing that the Issuing Authorities' denials or conditional approvals of the AT&T license transfer are invalid under the law However, they fail to demonstrate that there are no factual disputes and that they are entitled to a legal judgment without a hearing on significant public policy issues central to the case The Appellants provide minimal authority to support their claim, relying solely on 801 CMR 1.01(7)(h) as the basis for their request for summary relief.
801 CMR 1.01(7)(h) establishes the process for the Division to resolve cases through summary proceedings when suitable However, it does not specify the rigorous criteria that Appellants must satisfy to receive relief without a hearing.
A party believing there is no genuine issue of fact regarding any aspect of a claim or defense may file a motion for summary decision, asserting their entitlement to prevail as a matter of law, with or without supporting affidavits.
This regulation does not automatically grant the Appellants a summary decision or define the necessary standards they must meet; it simply outlines the procedural framework for filing the motion.
According to Division Regulation 4.06, an appeal must be initiated following the guidelines outlined in M.G.L c 166A, §14 The regulation also states that after conducting a hearing in accordance with M.G.L c 166A, §14, the Commission has the authority to issue an appropriate order.
(emphasis supplied) Thus, the need for a hearing on any appeal from a transfer proceeding is presumed in the applicable regulation.
Chapter 166A mandates that the Division must conduct a hearing for each appeal, ensuring that all interested parties receive proper notice, as stated in M.G.L c 166A, §14 The requirement for a hearing is clearly indicated by the use of mandatory language, reinforcing its necessity Additionally, the Appellants reference the Division's rulings in the case of Belmont Cable Associates v Board of Selectmen of the Town of Belmont, as part of their argument.
In the cases of No A-65 (1988) and Ridge Cablevision Corp v Board of Selectmen of the Town of Braintree, CATV Docket No A-33 (1983), the Division established a standard for summary decisions that closely mirrors the summary judgment criteria found in both Massachusetts and Federal Rules of Civil Procedure.
In the Braintree case, the Division noted:
The [Division] has held that a summary decision is
"appropriate where it has been demonstrated that no genuine issue as to any material fact exists and where the moving party is entitled to judgement as a matter of law."
In the Belmont case, the Division noted:
Under 801 CMR 1.01(7)(h), any party can request a summary decision in their favor, with or without supporting affidavits The Division has determined that a summary decision is suitable when it is clear that no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law.
Individuals who are significantly impacted by legal proceedings, though not formal parties to the case, are allowed to participate This includes the right to present oral arguments during hearings and to submit amicus briefs, as outlined in 801 CMR 1.01(9).
In a motion for summary judgment, the moving party must prove that no factual disputes exist According to the Federal Rules of Civil Procedure, any uncertainties are interpreted against the moving party, and the court meticulously examines the accompanying affidavits and depositions.
The Division has established a motion standard that aligns with the summary judgment criteria outlined in both the Massachusetts and Federal Rules of Civil Procedure Additionally, the standard for summary decisions specified in M.G.L c 30A imposes an even more rigorous requirement.
Chapter 166A indicates that hearings outlined in Section 14 must adhere to the regulations set forth in Chapter 30A of the Massachusetts General Laws Within the framework of Chapter 30A, the criteria for summary decisions is exceptionally rigorous, potentially exceeding the summary judgment standards applied in civil court cases in the Commonwealth.
In the case of Massachusetts Outdoor Advertising Council v Outdoor Advertising Board, 9 Mass App Ct 775 (1980), the Massachusetts Appeals Court established a comprehensive standard for summary decisions in administrative adjudicatory proceedings The court determined that a summary decision was suitable based on the specific circumstances of the case.
In the current state context, administrative summary judgment procedures respect statutory and constitutional rights to a hearing, as they permit an agency to forgo a hearing only when the submitted documents clearly indicate that a hearing would not be beneficial and would not influence the decision.
In the Outdoor Advertising case, both parties agreed that there were no disputed facts and that the application of the governing law was straightforward However, the situation has shifted dramatically due to AT&T's alleged commitment to the FCC regarding open access on its cable networks This development has introduced multiple disputed facts concerning AT&T's merger.
Application of the Regulations to Exclude Consideration of Open Access
If applied to preclude consideration of open access, the regulations as
applied are contrary to Congressional intent and federal law
Congress gave express authorization for consideration of competition issues during transfer proceedings 47 U.S.C §533 provides in relevant part,
Nothing in this section shall be construed to prevent any state or franchising authority from prohibiting the ownership or control of a cable system … in
The 11 Appellants' attempt to "reserve" their right to assert federal and Massachusetts claims in future proceedings is deemed inappropriate and rejected by the Appellees Generally, if a matter is not raised during administrative adjudicative proceedings before an agency, it is considered waived and cannot be brought up during judicial review This principle is highlighted in the case of Massachusetts Electric Company v Massachusetts Commission Against Discrimination, particularly in situations where state or franchising authorities assess that acquiring a cable system may diminish competition in the delivery of cable services within their jurisdiction.
The Cable Television Consumer Protection and Competition Act of 1992 amended previous laws to enhance competition in cable services This legislation empowers states and franchising authorities to make licensing decisions aimed at fostering or sustaining competition in the industry.
Before the 1992 amendment, legislation prohibited franchising authorities from denying a franchise license based on an applicant's ownership of other media interests (47 U.S.C 533(d)) In the case of Cable Alabama Corp v City of Huntsville, the court ruled that the city could not refuse a license transfer due to potential negative impacts on local competition (768 F Supp 1484, N.D Ala 1991) In response to this ruling, Congress amended the legislation to clearly grant franchising authorities the power to consider competition when evaluating franchise applications (H.R Rep No 102-628 at 91).
The ruling in Cable Alabama contradicts the intentions outlined in §533 (c) and (d) of the Cable Act Additionally, it undermines a key objective of the Cable Act, which is to foster competition in cable communications.
The amendment to subsection [533] (d) reinforces the authority of franchising bodies to foster competition by denying franchise applications that could restrict competitive cable services within a designated area Additionally, this amendment reverses the previous ruling in the case of Cable Alabama Corp.
Thus, a local franchising authority was expressly provided the right to promote competition by denying a license transfer if such a transfer would limit competitive cable services in the authority's jurisdiction.
The federal government's delegation of power to local franchising authorities aligns with the historical approach to cable regulation Since the inception of cable regulation fifteen years ago, Congress has emphasized that the local franchising process serves as the primary method for overseeing cable television This approach reflects the longstanding authority that local entities have exercised over cable operators through their general police powers concerning public streets and access ways.
Subsequent legislation regarding cable services has preserved the authority of state and local governments to combat practices that restrain commerce, as outlined in 47 U.S.C §521 note and 47 U.S.C §152 note (c)(1) In 1992, Congress clarified that its actions should not be interpreted as altering the applicability of any federal or state antitrust laws (47 U.S.C §521 note) Furthermore, the Telecommunications Act of 1996 explicitly states that it does not modify or supersede federal, state, or local laws unless specifically indicated (47 U.S.C §152 note (c)(1)) Consequently, the responsibility of local and state authorities to foster competition, as delegated by 47 U.S.C §533, aligns with federal policy.
Congress aims to maintain competition and safeguard public interests through franchising authority, as highlighted in 47 U.S.C §552(c) This statute clearly states that states and franchising authorities are permitted to enact or enforce consumer protection laws, provided they do not conflict with the provisions of this subchapter.
Massachusetts did not intend to exercise its right to protect competition and consumer choice at the state level, as the Legislature determined that the authority to approve transfers rests solely with the issuing authorities, limited only by the requirement that decisions not be "arbitrary or unreasonable" (M.G.L c 166A, §7) Consequently, the federally granted authority to promote competition and protect consumer choice lies with the issuing authority Therefore, if the Division denies local authority this power and ignores the anti-competitive effects of a transfer, such a decision contradicts federal law and should be deemed invalid.
The regulations as applied are inconsistent with the purposes of G.L c 166A
The Division's stringent enforcement of Regulation 4.04, as proposed by the Appellants, would limit the Issuing Authority's discretion by excluding important factors relevant to municipal cable license transfers This limitation contradicts the intent of the governing legislation and is therefore untenable, as established in the case of Nuclear Metals, Inc v Low-Level Radioactive Waste Management Board, 421 Mass 196, 211 (1995).
An administrative agency has no authority to exceed the power conferred upon it by its enabling statute See Massachusetts Hospital Assoc v Dept of Medical Security,
In Massachusetts, it is established that an agency's rulemaking authority does not extend to creating laws, as demonstrated in Loffredo v Center for Addictive Behaviors, where the agency was found to lack the authority to establish a private right of action not explicitly stated in the statute Agencies are limited to implementing the legislative intent as expressed in the law, and any agency action that deviates from this purpose is subject to invalidation, as highlighted in Nuclear Metals.
The Massachusetts Legislature has empowered towns and cities to maintain control over their cable licenses to safeguard residents, granting them significant discretion for effective supervision (M.G.L c 166A, §7) This authority ensures that the ultimate responsibility for licensing remains with the local issuing authority, as highlighted in the Campbell CATV Systems Assoc Part III v East Bridgewater case, which emphasizes that external opinions on corporate structures should not undermine this role Additionally, the Division recognizes that the "arbitrary or unreasonable" standard of review aligns with the "arbitrary or capricious" review applied to transfer decisions in other legal contexts, as seen in Rollins Cablevision v Somerset.
Under the arbitrary or capricious standard, it is essential to respect the significant expertise and vested interests of local licensing authorities Their judgments should only be challenged if they appear whimsical or lack a logical basis.
Atlantic & Pacific Tea Co v Bd of License Comm of Springfield, 387 Mass 833, 837-38
In 1983, the recognition of local authorities' expertise in regulating alcoholic beverages was established, as demonstrated in the case of McDonald's Corp v East Longmeadow, where local authorities were allowed to consider factors beyond food preparation and delivery when denying a food license Similarly, in Mosey Café, Inc v Licensing Board for the City of Boston, the importance of local regulatory discretion was highlighted, reinforcing the role of local governance in licensing decisions.
338 Mass 199, 205 (1958) (statute without standards for granting entertainment licenses confers quasi-judicial authority to do so in a manner that is not unreasonable or arbitrary)
Regulation 4.04 purports to restrict the issuing authority's consideration of a license transfer to only four factors deemed germane by the Division Such a restriction is entirely at odds with the Massachusetts Legislature's intent if, as here, a relevant and reasonable concern cannot be addressed as a result See Nuclear Metals, Inc., 421 Mass at 211 Application of Regulation 4.04 to prevent the Issuing Authorities from considering the issue of open access in this transfer decision clearly exceeds the Division's mandate to carry into effect the purposes of the statute and instead constitutes unauthorized lawmaking See Loffredo, 426 Mass at 545 Imposing these limits impermissibly narrows the ample discretion granted the Issuing Authorities pursuant c 166A, §7 and cannot survive scrutiny See Mass Hospital Assoc., 412 Mass at 346 Due to the serious competition implications of AT&T's closed access policy and its sudden conversion into an open access advocate, the requirement that open access be provided to customers is certainly not arbitrary or unreasonable and therefore must withstand Division review.
The Division Should Waive Regulation 4.04 For Consideration Of Open
The Division has the opportunity to prevent the invalidation of its regulations in this specific situation by waiving Regulation 4.04 This action would align with the intent of the waiver provision and reflect the objectives set forth by Congress.
The Issuing Authorities request the Division to waive Regulation 4.04 for this appeal, emphasizing the need for this action based on the information presented in the Magistrate's Report, regional hearings, Cambridge hearings, and pertinent correspondence.
1 The negative effects on competition of this transfer justify the waiver of
The Division has the authority to waive specific regulatory provisions when it aligns with the public interest, as outlined in 207 CMR 2.04 Acknowledging the rapidly evolving telecommunications industry, the Division emphasizes the need for flexibility in crafting and interpreting transfer regulations amidst changing technologies and corporate structures Consequently, the Division has established a waiver provision within its transfer regulations to enable a thorough evaluation of unique circumstances in transfer proceedings.
In Re Amendment of 207 CMR 4.01-4.06 at ả60.
The federal government's promotion of competition is crucial, and the significance of open access is so substantial that the Division should exempt the application of Regulation 4.04.
Regulation 4.04 may adequately address most common license transfers; however, AT&T's request raises significant public policy issues that extend beyond a limited interpretation of the Regulation The importance of open access is highlighted in AT&T's Canadian submission, emphasizing its role in preventing undue impairment of competition in major markets.
Regulation 4.04, enacted by the Division, claims to be rooted in reasoning from as early as 1983, referencing the Bay Shore Cable case, which allowed for the consideration of additional factors such as character and performance in other communities However, a narrow interpretation of the criteria in 4.04 fails to address the significant negative impact on competition resulting from the current transfer This situation exemplifies the convergence of technology and industries that the waiver was designed to address Moreover, the Division's failure to utilize this waiver power contradicts its own regulations and the authority granted by the federal government.
As the Special Magistrate noted, this transfer "is an event far different from the hundreds, if not thousands of license transfers that have taken place to date in the
The transfer raises significant public policy concerns, as noted in the Magistrate's Report To address these issues effectively, the Division must waive the application of Regulation 4.04 during the transfer proceedings This approach will ensure that the resolution is consistent, prompt, and safeguards the public interest.
AT&T received sufficient notice and opportunity to address the issue of
North Andover sought a waiver of Regulation 4.04 concerning license transfer as per Regulation 2.04, but the Division denied this request The denial was based on the grounds of untimeliness and a mistaken belief that the involved parties lacked sufficient notice to address open access advocates during regional hearings, as outlined in the Division's correspondence dated September.
G.L c 30A, §11 requires that parties to a hearing be provided sufficient notice of the issues so that they have "a reasonable opportunity to prepare and present evidence and argument." M.G.L c 30A, §7; see also New England Telephone & Telegraph Co v Dept. of Public Util., 372 Mass 678, 686 (1977) In practice, the notice must "sufficiently apprise" a party of the relevant issues See O'Brien v Div of Employment and Security,
The regional hearings and subsequent meetings between AT&T and the Issuing Authorities clearly show that both AT&T and MediaOne were well-informed and actively utilized the opportunity to present their evidence and arguments.
The Division's denial of North Andover's waiver request occurred without reviewing the Magistrate's Report, which ultimately clarifies any doubts regarding AT&T and MediaOne's ability to address the open access issue The Report highlights that there was extensive discussion on 'open access' during the hearings, with AT&T having ample opportunity—nine additional hearings and over a month—to present its arguments since the issue was first raised on August 4.
Worcester, 389 Mass 454, 458 (1983) (insufficient notice of hearing cured at first hearing and continuation for one week deemed sufficient)
AT&T actively engaged in advocating its position on open access by dedicating significant time and resources, including presenting a panel of experts to formally document its views An AT&T employee elaborated on both legal and non-legal justifications for a closed system during the Foxboro Regional Hearing, which the Magistrate noted involved vigorous and sometimes contentious discussions The extensive coverage of competing arguments in the hearings indicates that the open access issue was thoroughly examined Consequently, Appellants were adequately notified to respond meaningfully to the open access topic Additionally, AT&T was granted multiple opportunities to communicate directly with local officials through meetings and written correspondence.
The Cambridge hearing offered AT&T a significant platform to articulate its position on the open access debate, as detailed in the Cambridge Hearing documentation (Exhibit D) Furthermore, Cambridge officials and Appellants engaged in multiple discussions and correspondence regarding open access, including a dedicated three-page letter from AT&T to the Cambridge City Manager on November 3, 1999 (Exhibit E).
Regulation 4.04 Substantially Impairs the Issuing Authorities' Contractual Rights
The Division acknowledges that Regulation 4.04 may generally apply; however, applying these restrictions to the license agreements is not permissible Such application would significantly undermine the contractual rights of the Issuing Authorities without serving a crucial public interest.
I, §10; Allied Structural Steel Co v Spannaus, 438 U.S 234 (1978)
The Supreme Court has developed a three-step test to determine if subsequent legislation has impermissibly impaired contractual rights See Spannaus, 438 U.S 234
In assessing the impact of subsequent laws on contractual relationships, the court first evaluates whether the new law has indeed impaired an existing contract This evaluation follows precedents set in cases such as Parella v Retirement Bd of R.I Employee's Retirement System and Spannaus After establishing an impairment, the court must then determine the extent of this impairment, considering whether it is substantial, as highlighted in relevant case law like Little v Comm of Health.
In assessing contract modifications, the court must evaluate the impact on the agreement and whether the reduced right is substituted with a comparable security provision Additionally, it is essential to determine if the substantial impairment of the contract is both reasonable and necessary to address a significant social issue.
The application of Regulation 4.04 to the license agreements of Cambridge, Somerville, and North Andover infringes upon the Contract Clause, as a clear contractual relationship exists between the Issuing Authorities and MediaOne.
While courts typically show deference to agency regulations established under statutory authority, they will not extend this deference to actions based on an incorrect interpretation of the statute.
Authorities' contractual rights concerning the transfer approval process are restricted by Regulation 4.04 See Eagerton, 462 U.S 174, 189 (1983) (state law prohibiting certain tax allocations by company restricted contract options)
The Issuing Authorities' ability to uphold essential rights is significantly hindered by the constraints imposed by Regulation 4.04 According to its licensing agreement, Cambridge has explicitly retained the authority to assess whether any proposed change in control and ownership serves the public interest.
Both Somerville and North Andover have retained the right, through contractual agreements, to evaluate potential candidates based on various factors, including cable industry experience, character qualifications, and performance in other communities, as well as any other lawful criteria permitted by applicable laws.
At the time of contract execution, Massachusetts issuing authorities had the right to make transfer decisions based on reasonable concerns, as outlined in M.G.L c 166A, §7 Furthermore, federal law permits the denial of cable license transfers if the change in control could restrict competition in cable services, according to 47 U.S.C §533(d)(2).
The application of Regulation 4.04 limits the Issuing Authorities' ability to evaluate the impact of license transfers on consumer interests, effectively undermining their contractual rights and failing to provide equivalent security measures This situation results in a significant impairment of the license agreements, as established in legal precedents.
Significantly, these restrictions do not confront an important social problem See id at 247 On the contrary, eliminating their right to consider issues characterized by
Magistrate Beard emphasizes the critical role of Issuing Authorities in safeguarding resident interests, stating that their ability to do so is significantly compromised Consequently, the deference typically afforded to the Division regarding the necessity and reasonableness of specific measures is no longer justifiable.
Regulation 4.04 Should Not Be Applied Retroactively
The application of Regulation 4.04 cannot be retroactively enforced on the Cambridge and Somerville license agreements, as established in Salem v Warner Amex Cable Communications, Inc 392 Mass 663 (1984) These agreements were executed prior to the adoption of Regulation 4.04 or any related regulations, making it essential to evaluate whether AT&T's license transfer consent was withheld arbitrarily or unreasonably, particularly considering the intent to maintain competition as outlined in M.G.L 166A, §7.
Generally, the law in effect at the time an agreement is executed becomes an integral part of that agreement, while any subsequent amendments are only included if the contract explicitly shows the parties' intent to incorporate them This principle was upheld in Feakes v Bozyczko, 373 Mass 633, 636 (1977), where the Supreme Judicial Court ruled that new procedures for cable rate regulation did not apply to a cable license signed two years earlier, as the license lacked clear intent to include future legislative amendments.
In the case referenced, the Court highlighted the importance of the omission of the phrase "and amendments thereto" in the license agreement, indicating that this absence signifies a lack of intent by the parties to include any future modifications.
Regulation 4.04 unquestionably altered an issuing authority's scope of considerations in a license transfer decision First, Appellants assert that the Division's decision in Bay Shore Cable TV Assoc v Weymouth effectively established Division policy prior to the execution of the licenses CATV Docket A-55 (1985) Appellees agree that the Division may, in the interest of consistency, view prior adjudication as guiding However, as the Supreme Court pointed out, this is "far from saying… that commands, decisions, or policies announced in adjudication are 'rules' in the sense that they must, without more, be obeyed by the affected public." NLRB v Wyman-Gordon, 394 U.S 759, 765-66 (1969) Further weakening this position is the fact that Bay Shore Cable allowed for considerations beyond the four enumerated in 4.04 and was decided only a month prior to the execution of the Cambridge License, hardly the time necessary to establish firm Division policy CATV Docket No A-55 Second, contrary to Appellants' assertion, the Division in 1988 agreed that an issuing authority was permitted to review factors other than management, technical expertise, financial capability and character so long as these other considerations were not arbitrary or unreasonable See Somerset, Docket A-64 at 4-
5, explaining Bay Shore Cable, Docket A-55 Thus, the applicable law concerning the discretion of an issuing authority was substantively changed in 1995 by the Commission
Report and Order promulgating Regulation 4.04 See In Re Amendment of 207 CMR 4.01-4.06 at 18
The Cambridge and Somerville licenses do not explicitly indicate the parties' intention to incorporate changes in existing law into their agreement Instead, both licenses reaffirm the prevailing standard of review at the time of the agreement, which states that consent should not be unreasonably or arbitrarily withheld (Cambridge License §2.2(a); Somerville License §2.6(a)) Furthermore, without defined standards, the parties highlighted specific factors to be considered in a license transfer (Cambridge License §2.2(d)).
Somerville License §2.6(b) Thus, the alteration of the substantive rights of the parties under these license agreements would be an unlawful retroactive application of Regulation 4.04 See Salem, 392 Mass at 668-69.
Conditional approval is an appropriate exercise of the Issuing Authorities' pre-existing rights under the license agreements
existing rights under the license agreements
The appellants argue that the Issuing Authorities' conditional approval hinges on the amendment of licensing agreements to include open access Conversely, the Issuing Authorities assert that their evaluation of open access is a rightful exercise of the powers granted by the agreements and relevant laws.
The applicable law grants Issuing Authorities the authority to deny license transfer requests if the change in control threatens competition in cable services (47 U.S.C 533(d)(2); M.G.L c 166A, §7) This authority also encompasses the ability to impose conditions for allowing a change in control, as established in Portland, 43 F Supp.2d at 1152 Consequently, conditional approvals may be issued under these regulations.
Quincy and North Andover are an appropriate exercise of their rights under the law and do not constitute any amendment of the licensing agreements.
Failure to Provide Open Access Involves Appellant's Legal Ability and
Technical Expertise to Operate the Cable System under the Existing License.
The Division may choose not to invalidate its own regulations Instead, it could uphold the Issuing Authorities' decisions to deny or conditionally approve the transfer application, which are based on the transferee's legal qualifications and technical expertise to effectively manage the cable system under the current licenses.
1 AT&T's legal ability a The Issuing Authorities retain the power provided by federal legislation to promote competition
AT&T's refusal to grant open access to its system undermines the competition that Congress supports, as outlined in 47 U.S.C §533 There are valid concerns about the negative impact this transfer could have on competition, which Congress has acknowledged as an important factor for Issuing Authorities to consider during transfer proceedings, according to 47 U.S.C §533(d)(2).
Congress acknowledged the significance of competition in the industry and delegated the responsibility to state or local authorities to maintain this competition Additionally, Congress empowered these authorities to act in the interest of consumer protection regarding cable services, as outlined in 47 U.S.C §552(c).
The Massachusetts Legislature opted not to assume control over state-level competition, instead restricting the Division's authority to a deferential review of transfer decisions made by Issuing Authorities, as outlined in M.G.L c 166A, §7 This decision places the responsibility for maintaining competition solely on Issuing Authorities, with the Division's review limited to determining whether their actions were arbitrary or unreasonable Furthermore, AT&T's failure to ensure open access has detrimental effects on competition and raises concerns regarding restraint of trade provisions.
AT&T's refusal to offer open access significantly restricts competition and consumer options in cable service delivery This decision raises valid concerns among Issuing Authorities regarding potential violations of federal and state trade restraint regulations, as outlined in 15 U.S.C §§1-7 and M.G.L c 93 §4.
AT&T has acknowledged the anti-competitive nature of closed systems and advocated for regulatory measures to ensure equal access for ISPs, as highlighted in their submission to the CRTC They emphasized the significant market power companies can wield over "bottleneck broadband" access facilities, leading to potential discriminatory practices in broadcast access services and the refusal to unbundle essential components AT&T urged the Canadian government to mandate open access until safeguards are implemented to guarantee non-discriminatory and unbundled broadband access from cable companies Given this stance, it is inconsistent for AT&T to deny the anti-competitive impacts of operating a closed system in Massachusetts.
Tying or bundling arrangements that restrain trade violate both federal and state laws, specifically under 15 U.S.C §1 and M.G.L c 93 §4 Such arrangements must meet four criteria: (1) the existence of two distinct products; (2) the seller's refusal to sell the tying product separately; (3) the seller's significant economic power over the tying product that restricts competition in the tied product's market; and (4) a substantial amount of interstate commerce affected by the tying arrangement Relevant case law includes Eastman Kodak Co v Image Technical Servs., Inc and Parikh v Franklin Medical Center.
AT&T's arrangement in Massachusetts requires consumers to pay for the Road Runner ISP service, controlled by MediaOne, in order to access its broadband cable system This forces consumers to incur double charges—once for the mandatory Road Runner service and again for their preferred ISP Such bundling leads to increased costs, reduced consumer choice, and hindered innovation, highlighting AT&T's refusal to provide open access to other ISPs as a potential violation of anti-trust laws.
Recent precedents support the denial and conditional approval of transfer applications based on specific criteria In Portland, AT&T contended that the city's review process focused solely on the transferee's technical, legal, and financial qualifications.
The Portland court determined that mandatory access requirements are suitably connected to the transferee's legal qualifications for managing the licenses, thereby aligning with the city's contractual rights.
The anti-competitive outcomes negatively affect AT&T's legal qualifications to fulfill the contract, making them valid considerations for the Issuing Authorities in their license transfer decision These factors are neither arbitrary nor unreasonable for determining the transfer application Consequently, the Issuing Authorities' decisions should be upheld in accordance with M.G.L c 166A, §7 and the precedent set in Portland, 43 F.Supp.2d at 1155.
2 AT&T does not maintain or is unwilling to utilize the technical expertise to perform this contract in a lawful manner.
AT&T possesses the technology necessary to operate cable systems legally The ability to connect multiple Internet Service Providers (ISPs) to an existing cable carrier's infrastructure has already been successfully demonstrated on a smaller scale, indicating that this technology is readily available.
The bundling practices of AT&T have drawn comparisons to Microsoft's controversial operating system and Internet browser integration, which is currently under scrutiny by the U.S Department of Justice Similar to Microsoft's tactics that hindered the installation of rival browsers, AT&T's bundling strategy restricts competition by allowing only limited access to competing services or compelling consumers to pay extra for similar offerings from independent Internet Service Providers (ISPs).
A federal lawsuit has been initiated, claiming violations of the Sherman Act linked to extensive operations involving multiple Internet Service Providers (ISPs) in Clearwater, Florida Notably, one carrier effectively showcased this connection during the Burlington Regional Hearing Additionally, the Canadian Radio-television and Telecommunications Commission (CRTC) acknowledged a similar investigation within its jurisdiction, as referenced in CRTC 99-11.
At the regional hearings, AT&T acknowledged these successful multiple ISP connections but asserted that multiple connections on a larger scale would require
"substantial operational effort," including investment in new functionality and an upgrade of "a bunch of our existing hardware and software." See Burlington Hearing Transcript at
The CRTC decision challenges AT&T's pessimistic view by highlighting that the Canadian Cable Television Association anticipates cable providers will be ready to offer commercial access services by mid-2000 Additionally, a telecommunications company in Tacoma has announced plans to provide open access to multiple ISPs via its cable system by the end of the year, citing successful testing with three different ISPs.