Court battle may segue to cable TV wars: ruling on free speech could end exclusive franchises.

Court battle may segue to cable TV wars

A final decision has been rendered in U.S. District Court on a cable television lawsuit against the City of Los Angeles that, if heard by the U.S. Supreme Court, could decide the First Amendment rights of cable operators nationwide and possibly increase cable competition.

At issue is what regulations cities and other local governing bodies can enforce in granting cable franchises, and whether they can award exclusive cable television franchises to one operator per service area.

U.S. District Court Judge Consuelo Marshall has decided it is unconstitutional for a city to limit cable service to "one area/one operator" because that infringes on other cable companies' rights of free speech. She upheld some city franchise restrictions and disallowed others.

The new ruling basically reiterates earlier orders from Marshall's court, but the written decision is important because it closes the case and sets the stage for an appeal to the U.S. Supreme Court for a precedent-setting ruling with nationwide ramifications.

If the Supreme Court were to uphold the First Amendment rights of cable companies, it could lead to greater competition among cable companies for customers in the same geographic areas, and a loosening of municipal control over cable providers.

"It is a very important case. It is a very pivotal case that could wind up being the case that defines the First Amendment rights of cable," said Litty Holbrooke, an attorney with Miller & Holbrooke in Washington, D.C., which is representing the City of Los Angeles in the case. "It's critical. This is the most closely watched cable case in the industry."

Robert Bramson, an attorney for the plaintiff, Preferred Communications Inc., said his client will appeal some elements of Marshall's decision - specifically, the $1 damage award to Preferred, as well as the legality of certain city regulations upheld by Marshall.

"The decision of the court was mixed," he said.

Holbrooke said the city has not decided whether to appeal the judge's decision striking 11 of its regulations.

"What this does is set it up for review (by the Supreme Court)," noted Peggy Keegan, vice president of public affairs for the California Cable Television Association.

Bramson said the recent decision also is important because it is "final." Until Marshall put her orders in final, written form, she still could have changed her mind, Bramson said.

The case dates back to 1983, when Preferred Communications, represented by law firm Farrow, Schildhause & Wilson of Walnut Creek, Calif., first filed suit challenging the city's various regulations for obtaining a cable franchise.

Farrow, Schildhause & Wilson has filed similar suits in other cities, most of which were settled out of court.

Holbrooke said Preferred "is not a bona fide business; it consists of two brothers" who have no cable assets but formed the company solely for the purposes of the suit. Apparently agreeing, Marshall upheld the city's rule requiring that cable providers have "financial and technical qualifications" and awarded Preferred only $1 in damages.

However, Holbrooke said the shaky nature of Preferred's status as a cable company does not negate the importance of the suit in setting precedents on First Amendment rights for the cable industry.

Earlier in the case, the city challenged Preferred's standing to sue. That challenge did reach the Supreme Court, which found in 1986 that the case "plainly implicate(s) First Amendment interests," and returned it to U.S. District Court.

Bramson said Preferred's owners did have a real interest in setting up a Southern California cable company in 1979 to 1983, under the name Universal Cable, but had no luck getting a franchise with the city. He said his law firm then suggested the brothers form a new company and apply for a competing franchise, setting the stage for a lawsuit.

Marshall issued a series of orders in 1989 and 1990, which culminated in her written decision dated April 11, 1991. In the final decision, she struck down 11 city regulations and upheld 12 others.

"Our view is we won most of what we wanted," said Holbrooke.

Holbrooke said the City of Los Angeles has an ordinance that "has the effect" of limiting cable franchises to one company per area, although the franchises are non-exclusive and the city would consider a second provider if a financially viable one requested access.

Bramson countered that "if the city can be in a position of saying, |We're all for competition, so long as it's the people we pick,' then they're right back in the monopoly situation." He said Los Angeles has yet to spell out what its financial and technical requirements are.

Some other cities allow competing franchises, but Keegan said such franchises are rare because "efficiencies lend themselves to one operator per area."

Keegan said the CCTV is pleased that Marshall recognized that cable companies have First Amendment rights, but she feels those rights should be balanced against the rights of consumers. Overbuilding or saturation of a cable market "could be disastrous," she said.