Consumer Counsel v. Southern New England Telephone, 3:06cv1106 (JBA).

515 F.Supp.2d 269

OFFICE OF CONSUMER COUNSEL and New England Cable and Telecommunications Association, Inc., Plaintiffs, v. SOUTHERN NEW ENGLAND TELEPHONE COMPANY d/b/a AT&T Connecticut, Inc. and Department of Public Utility Control of the State of Connecticut, Defendants.

No. 3:06cv1106 (JBA).

United States District Court, D. Connecticut.

July 26, 2007.

Burton B. Cohen, Murtha Cullina, Hartford, CT, Marilyn Beth Fagelson, Murtha Cullina LLP, New Haven, CT, Paul Glist, T. Scott Thompson, Davis Wright Tremaine LLP, Washington, DC, William L. Vallee, Jr., Connecticut Office of Consumer Counsel, New Britain, CT, for Plaintiffs.

Charles R. Andres, Timothy P. Jensen, Tyler, Cooper & Alcorn, George M. Moreira, Southern New England Telephone Co., New Haven, CT, David L. Schwarz, Geoffrey M. Klineberg, Kelly P. Dunbar, Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, DC, John G. Haines, Tatiana D. Eirmann, Attorney General's Office, New Britain, CT, for Defendants.

RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

[DOCS. ## 38, 44, 57, 58, 61]

JANET BOND ARTERTON, District Judge.

Familiarity with the factual and procedural background of this consolidated action, as described in the Court's Ruling on Motions to Dismiss [Doc. # 77] is presumed. As detailed therein, this action was originally initiated as two separate lawsuits, the first brought by the Office of Consumer Counsel ("OCC") and the New England Cable and Telecommunications Association, Inc. ("NE CTA") against Southern New England Telephone Company, doing business as AT&T Connecticut, Inc. ("AT&T") and the Department of Public Utility Control of the State of Connecticut (the "DPUC") (Case No. 06cv1106), and the second brought by Cablevision of Connecticut, L.P., Cablevision of Southern Connecticut, L.P., and Cablevision of Litchfield, Inc. (collectively, "Cablevision") against the DPUC (Case No. 06cv1107), both concerning the issue of whether a proposed new service offered by AT&T (now marketed and provided by AT&T in Connecticut as "U-verse") falls within the definition of "cable service" under the Cable Communications Policy Act of 1984 ("Cable Act"), as amended, 47 U.S.C. § 521 et seq.,¹ thus subjecting AT&T to cable regulation in Connecticut, and challenging the DPUC's determination that AT&T's new service did not fall within the federal "cable service" definition. See OCC/NECTA Compl., Case No. 06cv1106 [Doc. # 1]; Cablevision Compl., Case No. 06cv1107 [Doc. # 1]. The parties have filed cross-motions for summary judgment on Counts 1 and 2 of each Complaint, which concern the issue of whether defendant DPUC's determination concerning AT&T's service is preempted by federal law and whether, accordingly, AT&T's provision of that service in Connecticut should be regulated as is the "cable service" provided by members of plaintiff NECTA and by plaintiff Cablevision.

I. Summary of Opinion

For the reasons detailed infra, the Court concludes that the new service being offered by AT&T, which was the subject of the DPUC's June 7, 2006 decision, constitutes a "cable service" being offered over a "cable system" by a "cable operator," as those terms are defined in the federal Cable Act. Accordingly, the Court holds that the DPUC's conclusions to the contrary, and its concomitant determination that AT&T need not comply with the franchising requirement in 47 U.S.C. § 541 and the regulations promulgated thereunder, are preempted by federal law. Thus, plaintiffs' Motions [Docs.## 38, 44] will be granted, and defendants' Motions [Docs.## 57, 58, 61] will be denied.

II. Factual Background

The parties dispute whether the factual findings made by the DPUC are entitled to deference, and they also contest which the DPUC findings may properly be classified as "factual," as opposed to "legal," but the following facts concerning the nature of AT&T's new "U-verse" service and the DPUC's decision are undisputed, unless otherwise noted, and are sufficient for the Court's adjudication of the pending Motions.

Pursuant to the Cable Act, "cable operators" providing "cable service" over "cable networks" are subject to franchising and other regulatory requirements promulgated by state regulatory boards (here, defendant DPUC) pursuant to the Act. Plaintiffs contend that AT&T's new video programming service, U-verse, constitutes a "cable service" being provided by a "cable operator" over a "cable network," and that thus the DPUC's determination that AT&T's service does not fall under the ambit of the regulatory requirements is preempted by the Cable Act and AT&T should in fact be subject to these requirements.

Prior to the filing of this action, AT&T announced "Project Lightspeed," a network upgrade project which would allow AT&T to provide video programming and other applications in Connecticut. On December 27, 2006, AT&T announced that it was beginning to offer its "U-verse" service in neighborhoods across Connecticut metropolitan areas (see Suppl. Mem. [Doc. # 75] and attachments thereto). AT&T will use its network to provide video programming service to subscribers at retail. AT&T's network uses Internet Protocol ("IP") packetization for its digital video signals transmitted over its network. Internet Protocol is a protocol, or electronic language, used to break up video programming into separate packets of data that are then sent to the destination, where they are reassembled by the equipment at the destination (here, the subscriber's set-top box). AT&T's service transmits to customers prescheduled video programming (e.g., ABC, CBS, ESPN, CNN, HBO) at the same time and on the same schedule as the programming is being transmitted from the programming provider. In addition, the service also makes available Video on Demand ("VOD") content, which is video programming that is stored on central computers/servers and which can be chosen using on-screen menus and viewed by subscribers at a selected time, rather than a prescheduled time; subscribers are charged for VOD programs on a pay-perview basis.

When a subscriber wants to view prescheduled programming (such as on ABC, CNN, et cetera), the subscriber uses his or her remote control and set-top box to initiate a request to change the video stream, and that request (i.e., channel 'change) will send a signal from the remote control/set-top box upstream to the "node," intermediate network office, or video hub office; in response to the subscriber's "request," AT&T's network will then transmit video programming to that subscriber. Thus, when an AT&T subscriber wishes to watch a particular program on a particular channel, there will be a flow of information in both directions, including the request sent upstream from the set-top box to the network, IP packets carrying the requested video information sent downstream from the network to the set-top box, and IP packets carrying error correction and other information concerning authentication (i.e., making sure the particular subscriber is entitled to view the requested programming) traveling in both directions. When an AT&T subscriber wants to switch to a different channel, he or she will push a button on the remote control and, after the intermediate communications/signaling described above, the video programming received by the subscriber on his or her television monitor will change.² Thus, while communication/signaling takes place upstream from the subscriber's set-top box to the network, the actual video programming runs in only one direction — downstream from the network to the customer premises; AT&T admits that no video programming is transmitted from the customer premises. Notwithstanding the internal signaling occurring between the subscriber's set-top box, triggered by a subscriber changing the channel or making a VOD selection on his or her remote, the result (the requested channel change/delivery of selected video programming) is the same as a subscriber to traditional CATV changing a channel on his or her remote — that is, the push of the button changes the video programming displayed on the screen.

AT&T's U-verse programming includes three primary packages of programming (named "U200," "U300," and "U400"). Each of these packages will offer different varieties of video programming and `will carry different prices, but each provides a certain number of channels showing prescheduled programming. These channels include local broadcast networks (e.g., ABC, CBS, NBC), cable channels (e.g., ESPN, CNN), premium cable channels (e.g., HBO), and also the aforementioned VOD/pay-per-view services. With the exception of VOD/pay-per-view, the programming on U-verse is linear — it is prescheduled by the programming provider, transmitted to AT&T on a schedule set by the provider, and made available to all subscribers on the tier. Every U-verse subscriber that selects a particular programming package will have the ability to request transmission of the same video programming (i.e., channels, VOD) as every other U-verse subscriber that subscribes to that same programming package.

The DPUC proceeding thus addressed the issue of whether AT&T's video programming service constitutes a "cable service" under the Act, which defines "cable service" as: "(A) the one-way transmission to subscribers of (i) video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service." 47 U.S.C. 522(6). As the DPUC noted at the time, this issue appears to be one of first impression among both courts and regulatory commissions. See DPUC Decision [Doc. # 57, App. A] at 1; Ill. Bell Tel. Co. v. Vill. of Itasca, Ill., 503 F.Supp.2d 928, 941 (N.D.Ill.2007). (leaving the issue of whether "plaintiff's IP-based services" were "outside the definition of `cable services' in the Cable Act" "to another day," citing Pacific Bell Tel. Co. dlbla AT&T Cal. v. City of Walnut Creek, 428 F.Supp.2d...