Meridian Township, Dearborn Overcome Comcast Motion to Dismiss

On October 3, 2008, U.S. District Court Judge Victoria Roberts ruled that certain portions of a Complaint filed against Comcast over the company’s plan to move PEG channels to the 900 - range of its lineup must survive Comcast’s Motion to Dismiss. As a consequence, the federal Court’s preliminary injunction which prevents Comcast’s PEG channel move remains in place, and several important questions related to PEG channel repositioning will now be forwarded to the FCC.

BloggingBROADBAND previously predicted a fault in Comcast’s argument at the preliminary injunction stage of this proceeding, and that the greatest potential victory in this lawsuit may come in an area where relief hadn’t even been sought. That prediction has now come to pass, as Judge Roberts has unequivocally rejected Comcast’s argument that Michigan’s new video franchising law supersedes franchising authority rights vested by federal law in the area of PEG channel placement obligations, as contained in franchise agreements.

For those just joining, here’s the background: Late last year, Comcast announced a plan in Michigan to migrate PEG channels from their low-channel-position, basic service location to the 900-range of the company’s lineup. In the process, the PEG channels would be delivered digitally, rather than through the analog portion of the company’s bandwidth. Franchising authorities became concerned that the PEG channel migration would require customers to lease digital converters, and that viewership would fall dramatically. Local governments raised those concerns with Comcast, but the company responded by saying that it would press on with its plan.

As a consequence, Meridian Township, the City of Dearborn, the City of Warren and Bloomfield Township filed complaints and sought a preliminary injunction to prevent Comcast’s PEG channel migration. That injunction was issued on January 14, 2008. After efforts to negotiate a settlement failed, Comcast filed a Motion to Dismiss the franchising authorities’ action.

Throughout these arguments, Comcast forwarded an awkward argument: The company claimed that Michigan’s new state video franchising law, which contains no provisions related to PEG channel placement, somehow supersedes federal law, which permits franchising authorities to enforce franchise agreement provisions related to PEG channel placement. As previously noted in BloggingBROADBAND, Comcast’s argument turns the Supremacy Clause on its head — and in the US District Court’s most recent Order, there is no question left as to how the Judge felt about the company’s state-law-trumps-federal-law claim:

Section 531 [of the United States Code] expressly permits ‘a franchising authority’ to enforce PEG channel requirements in franchise agreements . . . On the other hand, the Local Franchising Act [Michigan’s new law] purports to restrict a franchising authority’s ability to enforce PEG channel requirements in existing franchise agreements that are beyond the scope of the Local Franchising Act. Because the Local Franchise Act makes unenforceable what federal law explicitly makes enfoceable, the Local Franchise Act is preempted by 47 USC 531.

While Judge Roberts was careful to limit the preemption to the PEG channel matter at hand, the implications of the ruling could have much broader reach. Federal law vests franchising authorities with a variety of rights that many state laws purport to limit. Also raised by the Order is the question of whether a uniform franchise, like those developed in Michigan, can be imposed by state law where a state-mandated franchise would essentially strip rights otherwise vested under federal law, such as the right to “enforce any requirement in any franchise [agreement] regarding the providing or use of [PEG] channel capacity.”

While these broader questions may play out on another day, many issues related to the specific question of PEG channel placement were resolved. As a result, several of the franchising entities’ original claims against Comcast were dismissed — but two important assertions nevertheless survived Comcast’s attack. The first is the one already noted: That a franchising authority is permitted to enforce a franchise agreement term related to PEG channel placement, regardless of whether state law purports to render such a term unenforceable. The second relates to the fact that some customers would have to pay extra to receive PEG channels once digitized (i.e., those customers who currently receive only the basic, analog tier where no additional decoding equipment is required) and others would not (i.e., those that already receive digital service, and who, therefore, already lease a digital converter). Because those two claims survived, so, too, did the preliminary injunction. As a consequence, Comcast is still prevented from migrating the PEG channels.

Finally, while the federal Court has done a fine job deciphering these complex and often technology-specific questions, the Court nevertheless felt that the FCC would be a better forum for resolving the remaining questions. The Court, therefore, will be transferring the matter to the Commission under the “primary jurisdiction” doctrine, and will ask the Commission to examine six specific questions, among them, whether cable operators are precluded from charging for equipment used in connection with the reception of PEG channels on the basic service tier, and whether the digitization of PEG channels is discriminatory because some customers may be required to obtain additional equipment to view those channels.

A complete copy of the October 3, 2008 Order can be found here: meridian-october-3-2008-order133. Mike Watza from the Kitch firm and Joe Van Eaton from Miller & Van Eaton have led the legal charge on behalf of the franchising authorities. Congratulations to both and to the other counsel who have been involved in this effort.