This comparison is even more favorable because the rates in 1988-91 all became effective on dates after January 1. This comparison further exemplifies the reasonableness of Sammons of Illinois's rates. (Tr. at 90-93, 281-83).
85. In sum, the rates Sammons of Illinois charged for basic cable service since 1986 have been in compliance with the Cable Act and the franchise agreements with each of the municipalities at all times. (Sch. (1) at 19, P 25).
CONCLUSIONS OF LAW
1. This court has original jurisdiction of this action pursuant to 28 U.S.C. §§ 1331 and 1337 in that the action arises under and is governed exclusively by the Cable Act, 47 U.S.C. § 521-59.
2. Venue in this district is proper under 28 U.S.C. § 1391(b). (Sch. (1) at P 1).
3. The Cable Act prohibited municipalities from regulating cable television service rates after December 29, 1986. 47 U.S.C. §§ 521, 543(b), (c).
4. Under the Cable Act, the FCC was required to issue regulations "which authorize the franchising authority to regulate rates for the provision of basic cable service in circumstances in which a cable system is not subject to effective competition." 47 U.S.C. § 543(b)(1).
5. The Cable Act directed the FCC to review periodically its effective competition regulations to take into account developments in technology and to amend the regulations as necessary. 47 U.S.C. § 543(b)(3).
6. In its initial Report and Order announcing regulations to implement the Cable Act, the FCC determined that each of the municipalities was located within a market area with effective competition. Report and Order, FCC 85-179, adopted April 11, 1985, released April 19, 1985; see 50 Fed. Reg. 18637 (May 2, 1985); 47 C.F.R. §§ 76.33, 76.54 (1986).
7. In ACLU v. FCC, 262 U.S. App. D.C. 244, 823 F.2d 1554 (D.C. Cir. 1987), cert. denied, 485 U.S. 959 (1988), the Court of Appeals for the District of Columbia Circuit upheld most of the FCC implementing regulations, but found that the "signal availability standard" utilized by the FCC to define effective competition was "arbitrary and capricious." 823 F.2d at 1573. The Court remanded "that issue to the agency for a reasoned explanation of its chosen standard or the development of a new standard." Id.
8. Following the decision in ACLU, the FCC announced modification of the signal availability standard in its Second Report and Order released on April 29, 1988. Second Report and Order, 53 Fed. Reg. 17,049 (May 13, 1988). Under the modified FCC regulations, the municipalities were not considered areas with effective competition. The FCC delayed full implementation of the new rules for six months from the release date of the Second Report and Order to provide "a sufficient amount of time for a cable operator to adapt to the onset of regulation as a consequence of changes made herein." (Sch. (1) at P 6).
9. Because the ACLU Court struck down the FCC regulations ab initio, cable rates in the municipalities were improperly deregulated. Also, the FCC regulations issued after the enactment of the Cable Act subjected Sammons of Illinois to rate regulation, effective October 29, 1988. Sammons, 795 F. Supp. at 265-66 (order denying summary judgment).
10. Even though Sammons of Illinois was subject to regulation, the municipalities' claims still fail as a matter of law.
11. In regulating Sammons of Illinois, the municipalities were obligated to comply with the following procedures, which they failed to do.
12. The FCC regulations implementing the Cable Act established administrative procedures by which a municipality could challenge an FCC determination that effective competition existed. 47 C.F.R. §§ 73.686, 76.7, 76.33 (1986). The municipalities never challenged the FCC's 1986 determination that Sammons of Illinois was subject to effective competition. (Sch. (1) at P 14).
13. Under 47 C.F.R. § 76.33, franchising authorities that choose to regulate the cable service industry must, among other things, allow an opportunity for interested parties to comment on the authority's decision to regulate or on the reasonableness of the cable rates. The municipalities failed to comply with 47 C.F.R. § 76.33: they never conducted public hearings and never solicited written comments. Therefore, the municipalities are barred from challenging the rates.
14. The municipalities failed to take final action within 180 days on any basic cable rate increase proposed by Sammons of Illinois since 1986; therefore, those increases are deemed granted as a matter of law under the Cable Act, 47 U.S.C. § 543(d).
15. Moreover, the court's finding that the cable systems in the municipalities were improperly deregulated allows inquiry into the reasonableness of Sammons of Illinois's rates during the period at issue. See Ottawa v. Sammons, 795 F. Supp. at 264.
16. The basic cable rates charged by Sammons of Illinois in the municipalities were reasonable and appropriate, thus no rebate or refund is necessary.
17. The franchise agreements for Ottawa and Streator explicitly provided that Sammons of Illinois was entitled to a 6% increase per year. PX 1 at 3, § 7; PX 3 at 4-5, § 7.
18. To the extent additional increases were subject to municipal approval, the court concludes that: (a) the municipalities failed to hold the necessary public hearings on Sammons of Illinois's rate increases, so they are deemed approved, and (b) the rate increases taken by Sammons of Illinois were reasonable, were consistent with the franchise agreements, and would have been approved. (47 U.S.C. §§ 541(c), 543(d); 47 C.F.R. §§ 76.33).
19. The rates were reasonable and no rebate to the municipalities is appropriate. The municipalities have failed to carry their burden to prove by the preponderance of the evidence that Sammons of Illinois breached its franchise agreements by charging excessive rates. To the contrary, the evidence at trial demonstrated that defendants complied with all applicable provisions of the franchise agreements or ordinances with the municipalities.
For the foregoing reasons, judgment is entered in favor of the defendants Sammons Communications, Inc. and Sammons Communications of Illinois, Inc. and against the plaintiffs Cities of Ottawa, Marseilles, and Streator and the Village of Naplate as to counts I, III, V, and VII of the complaint.
IT IS SO ORDERED.
CHARLES RONALD NORGLE, SR., Judge
United States District Court