from: Blogging Broadband [1]

Comcast Blunders in TRO Argument on PEG

Litigation can be full of ironies. The federal temporary restraining order which prevents Comcast from migrating Michigan’s public, educational, and government access channels to the 900 range of the company’s lineup again proves the point.

We may well look back on the lawsuit initiated by Meridian Township, Michigan and supported by the City of Dearborn and conclude that the greatest victory came in an area where no relief had actually been sought. As yesterday’s BloggingBROADBAND predicted, Comcast made a serious tactical error in its argument before the US District Court for the Eastern District of Michigan: The company asserted that Michigan’s new video franchising law somehow supersedes the requirements of the federal Cable Act, or, as put in my article yesterday, Comcast made a sort of “reverse-Supremacy Clause” argument. As foretold, Comcast’s odd theory was greeted by some of the most critical language in Judge Victoria Roberts’ sixteen page Opinion and Order. According to Judge Roberts: “Defendants responded [to the communities’ Cable Act positions] by arguing state law preempts any federal law . . . and [Comcast] maintain[s] that relevant provisions of [the communities’] [Franchise] Agreements were invalidated by the Michigan Uniform Video Service Local Franchise Agreement . . . contrary to [Comcast’s] position, the requirements of §531 and other federal statutory requirements, are not, ‘in addition to . . . the provisions of [the] uniform video service local franchise agreement. . .’ By its terms, the Michigan Franchise Agreement requires compliance ‘with all valid and enforceable federal and state statutes and regulations,’ and this compliance is not ‘additional’ to anything in the franchise agreement.” Judge Roberts specifically applied this reasoning to a local franchising authority’s discretion under the Cable Act to require PEG programming in a franchise agreement – but she also went further, and found that the Cable Act’s requirement that the total cost of basic service must be reasonable still exists, too — despite state law in Michigan which purports to prohibit any rate regulation.

This language confirms the answer to a rhetorical question I posed to a Comcast official almost a year ago: “If state law purports to both limit an LFA’s federally-vested discretion and require cable operators to comply with all enforceable federal law, what’s really changed?” The fact is that the state law’s framework has been circular from the beginning, and changes little (and perhaps nothing). Assuming that such a clause ever had to be included, Michigan’s state law expressly requires compliance with all enforceable federal requirements, and Judge Robert’s Opinion and Order confirms this view. As a consequence, Comcast has stumbled through a door which opens to a wide variety of other issues that cable operators have claimed over the course of the past year were preempted under Michigan’s state law – things like rate regulation, and the imposition of customer service standards to name just two. It also shores up what was likely the next target of Michigan’s cable providers: Local governments’ institutional networks.

While that is good news, some choppy waters lie ahead on the underlying purpose of the lawsuit. As originally envisioned, the suit’s primary design was to prevent Comcast from digitizing PEG channels and migrating them to the digital range of its lineup. In this case, Meridian and Dearborn relied on the argument that PEG channels should be treated in the same manner as broadcast channels, and that each of their franchises required PEG to be on the basic tier. On this issue, however, Judge Roberts didn’t provide the same comfort as she did on the matter of federal law’s superiority. Instead, her Opinion and Order notes that “Nothing in the [federal] statute or legislative history prohibits a cable provider from including both digital and analog channels on the basic service tier, or from providing PEGs in one format and broadcast channels in a different format. In fact, [the communities] concede this, and it is unlikely they will prevail on the merits of this claim” (emphasis supplied). And while franchise agreements were found enforceable with respect to PEG, the Judge nevertheless distinguished between the differing requirements of the two franchise agreements before her. In the case of Dearborn, the city’s franchise agreement prevents Comcast from unilaterally moving PEG channels – a provision that won’t be found in many franchises. With respect to this sort of language, the Judge notes that Dearborn will “likely . . . prevail on the merits” as it attempts to enforce its franchise agreement with respect to the placement of PEG channels. Unfortunately, the conclusion with respect to Meridian’s agreement wasn’t as assuring. In fact, according to Judge Roberts, “Plaintiff Meridian’s agreement appears to significantly differ. That agreement states that Defendants will be permitted to change the location of PEG stations after paying a small penalty [JDK: costs associated with re-branding at the new position]. Under the Meridian agreement, [Comcast] may unilaterally change the location of PEG channels. Plaintiff Meridian cannot succeed on the merits of its franchise claim.”

Meridian Township has taken a leadership role in spearheading this effort on behalf of Michigan’s local franchising authorities. It would be a sad twist if the community were to fall victim to the language in its own franchise. An important lesson, however, should also be taken away by other communities: When considering the potential impact of this lawsuit and the Order, the question of a franchise’s effectiveness in preventing PEG channel migration will be determined on a case-by-case basis — just as the Judge’s initial conclusions drew distonctions between the two franchises before her.

Fortunately, even in the case of Meridian Township, it appears that two opportunities for the requested relief still exist under the language of the Order: Meridian can establish that Comcast’s pricing scheme is unreasonable under federal law, or it can attempt to reverse its purported concession “that nothing in [federal law] prevents both digital and analog channels on the basic service tier.” That’s an indulgence that never should have been extended if it were, in fact, made by the communities.

Like all temporary restraining orders, the relief granted is intended to be short-lived, even though a date for consideration of a preliminary injunction is not contained in the Order. With respect to the misguided issues of state law supremacy, Comcast has already sunk its own ship. Expect the company to get stronger on its other arguments, however, as this case progresses.