In a decision that represents a win for traditional cable operators and the FCC, the U.S. Supreme Court ruled Tuesday that satellite-delivered cable systems face the same franchise-fee requirements as standard cablers.
The unanimous decision, written by Justice Clarence Thomas, concerns a cable-like program-delivery technology that’s common in urban apartment complexes.
Affected are those SMATVs — satellite master antenna TV systems — that provide satellite-delivered cable-like service to several buildings along a city block.
The high court ruling does not apply to SMATVs that provide services to a single building within a defined area.
As a result of the decision, SMATVs could be required to pay as much as 5% of annual gross revenue in franchise fees to local municipalities. Also, they might be required to set aside a portion of their channels for delivery of public, educational and governmental channels.
The decision is a blow for aggressive start-ups like New York City’s Liberty Cable Co. For the past two years, the tiny company has been beaming programming via microwave to large apartment buildings in the city.
The service has signed up 12,000 subscribers, mostly by offering lower prices due to its unregulated status vs. its larger competitors, Time Warner’s Paragon and Manhattan Cable. While cable reaches 58 million subscribers nationally, Liberty and other satellite backyard receivers account for about 3 million.
The National Cable Television Assn. has long argued that rival delivery technologies — including SMATVs — should face the same franchise rules as its members.
Five percent is the standard fee levied on traditional cable operators. Last year, cablers paid $ 916 million in franchise fees to municipalities throughout the U.S., said a cable industry spokeswoman.
In 1984, Congress passed the Cable Communications Policy Act, a cable deregulation law exempting certain SMATV providers — for example, those that serve “only subscribers in one or more multiple-unit dwellings under common ownership”– from facing franchise obligations if the system did not cross public rights of way.
However, the FCC later interpreted the law to mean a franchise would be required if a company provided SMATV service to several separately owned apartment buildings on the same block, even if public rights of way were crossed.
Last June, the U.S. Court of Appeals for the D.C. Circuit overturned the FCC’s decision, saying there was no basis for distinguishing SMATV systems serving buildings under common ownership or those serving buildings with separate owners.
In tossing out the appellate court decision, the Supreme Court ruled that the lower court erred in finding that Congress intended to exempt all SMATV providers from franchise obligations.