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High Court Turns Down SMATV Appeal

The U.S. Supreme Court told a municipal lobbying group it would not hear its challenge of a ruling that allows private-cable operators to conduct business without a local franchise.

In an order released on Oct. 2, the high court rejected a writ of certiorari offered by the National Association of Telecommunications Officers and Advisers in its case against Entertainment Connections Inc., a satellite master-antenna television provider.

The lobby group argued that the company should be required to obtain a franchise to operate, even if the business reaches its multiple-dwelling-unit customers by leasing dark fiber from Ameritech Corp.

ECI launched its business in 1996 in Meridian Township, Mich., serving multiple dwelling units. It hoped to expand into East Lansing, when local officials ordered the company to obtain a franchise.

City officials made it clear that the only way ECI might be permitted to operate without a franchise was by constructing a headend at each building it served, so its plant would never cross rights-of-way.

Ultimately, Meridian Township filed suit against ECI. The cities' argument failed to win favor at the Federal Communications Commission, which ruled in 1998 that ECI was neither a cable system nor a cable operator, as defined by federal statutes.

At the time of the FCC arguments, the cities were joined by the National Cable Television Association, which complained that the federal ruling would allow ECI to operate like a cable system, but without the franchising burdens borne by citywide operators.

Within weeks of the FCC decision, appeals of the agency's ruling were filed in three different U.S Court of Appeals circuits. At each step, ECI was victorious.

A spokesman for the NCTA said the association did not participate in the Supreme Court petition request.

Though rebuffed by the high court, NATOA members still claim the decision was wrong. State law supports NATOA's attempt to obtain franchise concessions from private-cable operators, members added.

The trade group labeled the ECI case "one limited exception." If a SMATV operator leases facilities in the right-of-way from an unaffiliated company that holds an independent right to that infrastructure, as did ECI, the lease relationship does not itself force the SMATV business to get a franchise, NATOA conceded.

However, if a SMATV business controls or owns any infrastructure that touches public rights-of-way, franchise obligations would apply, the group maintains.

In a statement, NATOA warned its members against companies that might use the ECI decision to "evade" obligations via lease arrangements.

ECA attorney Deborah Costlow said she was thrilled-but not surprised-that the Supreme Court rejected the issue.

"This is a good thing for competition," she said. "There are some companies out there which have been waiting to see what happened with this case before implementing their plans."

ECI president David Roberts expressed frustration tempered by relief. "The fact that we still exist shows our determination," said Roberts, who said he was thankful for employees who stuck with him even though an adverse court decision could have ended it all.

"Local governments do have a huge responsibility to constituents to make competition happen. They're not doing the public any favor" by burdening potential competitors, he said.

Businessmen like Roberts are simply out to find a niche and serve it well, he said.

"There's a large pie and I'm not even taking a small part of the crust," he said. He also scoffed at incumbent operators' plea for a "level playing field."

"No real competition exists and it won't as long as I have to buy programming through AT & T or its affiliates," he said.

As a result of federal rulings, ECI will be able to operate without paying franchise fees, providing public-access channels or facilities and without complying with must-carry or retransmission-consent rules.