COMMUNITY COMMUNICATIONS CO., v. BOULDER
Legal provision: Sherman
ORAL ARGUMENT OF HAROLD R. FARROW, ESQ., ON BEHALF OF THE PETITIONER
Chief Justice Burger: We will hear arguments next in Community Communications Company against City of Boulder.
Mr. Farrow, I think you may proceed whenever you are ready.
Mr. Farrow: Mr. Chief Justice, and may it please the Court, Plaintiff in this case is a cable television operator.
As such a business, it is a medium of communication, supplying news, information, and entertainment.
This includes the origination of programs as well as rebroadcast of broadcast signals and the performance of editorial functions.
So, as we look at it from the restraint of trade problems, we are dealing with a restraint of trade and business in the commerce of ideas.
Unidentified Justice: Are you arguing an antitrust pre-emption, or are you arguing First Amendment?
Mr. Farrow: We are arguing an antitrust exemption or pre-emption in terms of a restraint of the First Amendment trade.
I don't think we can separate the two.
As I understand, it is the posture of the Court that when you are dealing with antitrust you deal on a case by case basis.
You would have to look at the nature of the industry and the nature of the particular restraint, and so I don't think as we deal with the question of exemption we can ignore the fact that we are dealing with a First Amendment... trade and commerce under the First Amendment.
That is certainly our posture in the case.
Unidentified Justice: Well, what if the City of Boulder had franchised two streetcar companies in the old days to one handle the north side of town and the other handle the south side of the town, and in each of those streetcars there were the typical advertising things that you find in streetcars or buses?
Would you feel that was unconstitutional under either the antitrust laws or under the First Amendment?
Mr. Farrow: I would assume that the advertiser would have access to either one of the transit companies.
The transit companies are dealing with a franchise.
I think the concept, the connotation of franchise in terms of cable television is totally inappropriate.
It implies a special privilege.
For example, your transit car had one half of the town, it had a special privilege.
The advertiser, though, he had access to either one of those fellows.
Unidentified Justice: But the cable television, the two competing cable television companies certainly don't have access to the entire town.
One has access to one side of the town, the other has access to the other side.
Mr. Farrow: You are equating public utility type activity, commercial type activity, if you want to, with the trade of First Amendment, and you are equating a business that ought to be licensed and free for all, subject to reasonable restrictions, to a business that is a special privilege.
Unidentified Justice: Why do you say ought to be?
Mr. Farrow: Because I think... because there is a current trend among some of the cities in recent years to take the posture that because we are the guardians of the streets, the proprietors of the streets, the landlords of the streets, we can elect and say that we are going to choose one monopolist who only that monopolist can be in the cable television business and purvey the trade of information, news and information.
I think that is totally wrong.
Unidentified Justice: How different is that from zoning?
When you say that one theater shall be built on this block, and we just don't want any other theaters within a mile of it?
Mr. Farrow: Well, I think that it is different in this respect, that one deals specifically with land use.
As such, it is a traditional area of government regulation.
It must have some rational basis, and whatever, and what have you, but let's, instead of talking about theaters, let's talk about newspapers.
Unidentified Justice: Well, my question is about theaters.
Mr. Farrow: Yes.
As to theaters, if there were some logical reason why that you had to put them 1,000 feet apart, as, for example, they had a demonstrated cause and fact of producing some evil that you wanted to cure, such as a red light district, as I think happens, then the question of the zoning power to say, you can all be in the theater business but you've got to keep a little distance between yourselves, seems like a time, place, and manner restriction, and what we are dealing with here--
Unidentified Justice: And it may well be in the number of square miles comprised in the City of Boulder that there are many more applicants for theater licenses than there are permissible sites.
Mr. Farrow: --For theater licenses.
Unidentified Justice: Yes.
Mr. Farrow: Well, I would think that when that happened, then the price of theaters would go up, and he who wanted to be in the theater business would go out and buy out an existing theater, pay a higher price, but not be excluded from the market just because he owned another.
If there is only room for 15 of them, and the price, like liquor licenses, go up, he still is there.
You don't have... you don't have a time, place, and manner restriction.
What we are dealing with in this case is, we are dealing with no time, no place, no manner, no how is this company allowed to do business in two-thirds of the city, and the only justification we have for it is is that it might be, it might be a natural monopoly, and I think it is just... it is extraordinarily different from the circumstance of a couple of theaters.
I think that one of the confusions we deal with in this thing is, we forget the nature of the particular regulation here involved.
We are not dealing with any kind of traditional zoning law, like public utility regulation or commercial regulation, or selling raisins, or even... we are not even dealing with a question of regulation of cable television, because there is not a single regulation adopted yet about how you conduct the business of cable television.
We are not dealing with safety.
There is no issue of safety involved.
We are not dealing with whether or not you steal from your customers.
We are not saying that you can't go out and electrocute your customers, or scare the horses, or anything of that sort.
We are dealing with a decision that one city makes that says we think there might be a natural monopoly, and you, this particular company, almost like a bill of pains and penalties, you may not even think about operating over there.
Now, it would seem to me it would take the most extraordinary kind of a justification to do that, and the only one I know of in the case law is those dealing with physical impossibility, but in this case we have both in Boulder... pardon me, Mache One and again in Mache Two, specific findings.
There is no physical impossibility.
There is no physical impediment.
Not only is there room for four on the poles, but after that you can go underground and you've got all the ground from here to China.
So that we are not dealing with physical shortage or whatever.
The suggestion that we are dealing with economic scarcity is a justification for that.
I think it is brand-new to the whole concept of First Amendment freedoms.
And while we are touching that point, I think one of the extraordinary things is in Boulder, too, now, which has now clarified its holding in Boulder One dealing with the antitrust issue and then brought up this question of economic scarcity.
We have this funny situation where the Appellate Court has twice now set aside or ignored the specific findings of fact of the Trial Court without reviewing the Trial Court record.
As far as we can tell, nobody but Judge Markey has ever looked at the record other than Judge Mache.
In that record, in that very record dealing with economic scarcity, there is a document there produced by BCC, the co-conspirator, put in evidence by the City of Boulder, which contains a five-year economic projection of BCC.
Now, you remember that BCC were the people who said in July of 1979, give us a permit, we are prepared today to compete with this company, and the city said, no, no, we want to stop and think about it.
We are going to think that maybe it's a natural monopoly, and then make it a natural monopoly, or make it an unnatural monopoly.
That piece of paper in there, that five-year projection, demonstrated that BCC anticipated putting $1.3 million in equity in Year One and none thereafter.
In the fourth year, they anticipated a $3.9 million distribution to the partners, and as of the time they anticipated distribution they would have recovered all but $45,000 of their $1.3 million by depreciation, by the recapture of capital, and they would still own a business that in its fifth year they anticipated would produce $85,000 worth of taxable net income, and $490,000 more worth of cash flow.
Now, you know, evidence of economic scarcity is just not there.
The contrary is there.
That is why we say, you know, that the major error with this case and the finding in the major distribution areas is that the Circuit, the Tenth Circuit has refused to review the record, refused to look at the record.
Unidentified Justice: But certainly we don't ordinarily take cases in which the Court of Appeals has held or disagreed with findings of the District Court, do we?
Mr. Farrow: I understand.
I think that... of course, I can't guess why you took the case.
I would think there are two logical reasons.
One is, it does deal with the cable television industry, which is an emerging First Amendment speaker, and is of very significant national import, and there are certainly current abuses being reported daily in the press of this concept of the RFP process.
The other thing is, we have the concept that a city in the State of Colorado has apparently decided that because it is a home rule city, that it is... it is the sovereign, and free to take the kind of action it took, apparently on the theory that because it represents directly the people of the state by its constitutional stature, it has the power, and then of course it supervises it, it satisfies the tests of LaFayette and Midcalf.
Well, it got that lofty status, if it got it at all, by virtue of that state constitution, and that state constitution says in it, I think it is Article 10, Section 2, that constitution...
"No law shall be passed impairing the freedom of speech."
"Every person shall be free to speak, write, or publish whatever he will on any subject, being responsible for all abuse of that liberty."
So, it is difficult for me to understand how a city who claims its power to come from that Constitution can say that same Constitution contemplated to be able to pass something it calls a law that totally locks out a given speaker from two-thirds of a city, at the same time saying they are going to hold that two-thirds open so they can select another monopolist which they can totally control.
I just don't believe there is any contemplation, or any mandate.
I think that is a clear prohibition.
Now, in Boulder Two, we have Judge Seymour, I guess it is, who says in her Footnote Number 3, we didn't say it was purely local in Boulder One.
I misunderstood her.
I thought that's what they were saying, and apparently everybody else thought that, because that's the point that is briefed throughout these cases.
But if she didn't say that, what she was saying then is that there is a local interest and a state interest, and if there is a local interest and a state interest, then of course any state action in the matter is controlling.
Now, there is no specific state statute dealing with cable television, but there are two things that clearly control.
One is the state antitrust statute, which recognizes its policy of pro-competition.
And the other thing is the state constitution, which forbids it, just like it forbids the City of Boulder--
Unidentified Justice: Aren't you again asking us to second guess the reading by the Court of Appeals which sits in that circuit and in that state, of a state constitutional provision?
Mr. Farrow: --No, sir.
I think that it is not the function of this Court to struggle with the inner workings of cities versus states.
I think that what we are talking about here is an implementation of the national policy of antitrust, and the national policy of antitrust as it affects the First Amendment in particular, and I am saying that no matter how Colorado internally wants to rearrange its organization is of no interest either to us or to you.
Unidentified Justice: Well, I thought you were just quoting the Colorado Constitution.
Mr. Farrow: We did that, Your Honor, I meant to do that in connection with the LaFayette-Midcalf test, which indicates where the city claims the exemption or pre-emption or immunity of the state if it can demonstrate the state made it do it, and it is in contemplation of what the state wanted to do, and the point of the demonstration is, the state didn't make it do what it did, nor did the Constitution, nor did the Constitution contemplate it.
As a matter of fact, the Constitution and the antitrust laws of the state seem to me to prohibit the very kind of activity we are talking about, so that I don't believe there is any possibility that the city of Boulder can say whether it is the agent or the state of Colorado, as being the legislature and the Governor, or whether it is an agent of the state of Colorado as being the people who adopted the Constitution, no matter who the basic source is, the direction is the contrary, the opposite of what they claim, and there is no justification, I believe, for this type of activity.
Unidentified Justice: Except that, I am sure you would say, and others would agree, that a city or a state can't experiment with First Amendment values.
Doesn't this fall somewhere in reach of what Justice Brandeis said about letting new problems, particularly, be dealt with in the laboratory of local control?
Mr. Farrow: Well, it--
Unidentified Justice: I assume you would agree that this whole matter of cable television is something that is in a state of rather swift--
Mr. Farrow: --It is.
It is in a very fluid state.
I think it is reflected by the fluidity of this case.
We have five forums at one time, concurrently.
Surely it is that, but I think the problem is the form of experimentation that we are taking is in clear derogation of both the national policy of antitrust and the national First Amendment rule.
And I say that because what has happened, this process that is developing, and the process we are dealing with here is the process in which the city says, I own the streets, I am the proprietor of the streets, I've got my toll gate between you, the speaker, and the people who want to be customers, and if you want to do business in my town we are going to do it on an RFP basis.
You give me a request for proposals, and then I am going to shop among you, and I am going to find which of you will pay the most in money or in services, but most important of all, and most extraordinary of all, in subservience.
Which of you will promise you won't sue me?
Which if you will waive your rights to get into the business?
Which of you will sign a contract that says that I can forever control your programming?
That is the process we are dealing with, and that is exactly the process we are having in Boulder, and it is not just in Boulder.
It is going on, and it is time we do something about that to say that kind of experimentation is too much and too far.
What we need is a clear statement from this Court saying that, you know, it is one thing to experiment in a way to improve or increase the thing, but it is another thing to set aside national policies, it is another thing to get to a position where you can and will, and demonstrably so, are abusing the process.
Unidentified Justice: --Well, tell me, Mr. Farrow, what do you think Colorado could do to bring itself within the... to bring this situation within the Parker Brown exemption?
Mr. Farrow: I think it ought to take a look and see if there is an abuse out there, and if there is an abuse, it ought to cure the abuse.
Unidentified Justice: No, what I am trying to get at is, what is missing here?
A legislative statute permitting Boulder to do this?
Mr. Farrow: Yes, right, what is missing--
Unidentified Justice: Would that be enough?
Mr. Farrow: --A legislator saying, set forth some kind of regulation.
Unidentified Justice: Suppose the state legislature--
Mr. Farrow: Yes, sir.
Unidentified Justice: --were to enact a statute which authorized Boulder to do exactly what it did.
Would you be here?
Mr. Farrow: No, I don't think so.
Then I don't think so.
I don't believe--
Unidentified Justice: You would not--
Mr. Farrow: --No, sir, I don't believe--
Unidentified Justice: --I didn't catch your answer.
Would you be here?
Mr. Farrow: --No.
The answer is not there.
If the state legislature were to enact a law that said there could only be one newspaper in the state, or one cable television in the state, I think they would not have any immunity--
Unidentified Justice: That is what I am trying to get at.
You would say, a statute authorizing Boulder to do this, passed by the Colorado legislature--
Mr. Farrow: --Would be invalid.
Unidentified Justice: --would be invalid under the First Amendment.
Mr. Farrow: Under the First Amendment, and I believe under the antitrust also.
I cannot believe--
Unidentified Justice: What is the Parker exemption?
Mr. Farrow: --Well, you know, you can read those cases a lot of ways, but it seems to me to be extraordinary, the thing that a state could secure immunity from a Federal national policy, a Congressional statute, by violating the Constitution.
Unidentified Justice: Well, I know.
That is your First Amendment argument.
Mr. Farrow: Yes.
Unidentified Justice: That is your First Amendment argument.
Mr. Farrow: Yes, sir.
Unidentified Justice: But Parker and Brown certainly permitted state legislatures to get themselves out of, as states, the restraints of the--
Mr. Farrow: Oh, yes, sir, I think... we are dealing with ordinary commercial activity.
Unidentified Justice: --But your answer to me is, that couldn't work here--
Mr. Farrow: It couldn't work here.
Unidentified Justice: --because of the First Amendment provision.
Mr. Farrow: Yes, sir, and I don't think you can separate the two.
I would like to reserve a moment for rebuttal if I may, so if I can resign and sit down for a moment, I would like to.
Chief Justice Burger: Very well.
ORAL ARGUMENT OF THOMAS P. MC MAHON, ESQ., AMICUS CURIAE
Mr. Mahon: Mr. Chief Justice, and may it please the Court, I appear on behalf of the 23 amici states, including Colorado, who believe that home rule cities should not have state action antitrust immunity in the circumstances which exist in this case.
In the view of the amici states--
Unidentified Justice: I gather this is independently of the First Amendment argument.
Mr. Mahon: --This is correct, Your Honor.
I attend to address the state action question, Your Honor.
In the view of the amici states, the state action immunity issue presented here is whether in the absence of any competition displacement policy or supervision by the state itself, and based solely on the grant of general home rule self-governing authority, the actions and policies undertaken by home rule cities on their own initiative can satisfy the test for state action immunity which this Court has previously articulated.
Now, the amici states have an interest in this question because they are desirous of securing the benefits of competition to their citizens through broad application of the Federal antitrust laws and also the state antitrust laws which in many instances are construed in accordance with the Federal antitrust laws.
Unidentified Justice: Well, don't they also have an interest in seeing that the city lobbyists in the state legislature have as little influence as possible?
Mr. Mahon: Your Honor, if I understand your question, it is to what extent should these decisions be left to the localities.
Unidentified Justice: Well, to what extent do the states have a right to come to this Court and say, in spite of the provision of our constitution and statutes and so forth, do we nonetheless have a right to have this Court pronounce a rule that says the home rule provisions of our constitutions are virtually meaningless because of some overriding Federal consideration?
Mr. Mahon: Your Honor, in view of the amici states, the provisions of the home rule constitutions are not themselves meaningless, but there are really two separate questions that are involved here.
One has to do with the allocation of power between the state and its political subdivisions through home rule powers or otherwise, and the other matter that is at issue here is the national competition policy that is embodied in the antitrust laws, and these... this sort of collision has occurred before, as Your Honor knows, three years ago in the City of LaFayette case before this Court.
In the views of the amici states, the states themselves are free to allocate power by means of home rule to their municipalities.
When they do that, they may do it in a certain way which may result in antitrust immunity under the prior decisions of this Court, or they may do it in a way which does not manifest antitrust immunity.
If they choose the latter course, then those municipalities, when they exercise the powers that have devolved on them through the state constitution should do so in a way that complies with the antitrust laws.
The amici states view that as the appropriate balance, really, Your Honor, between the state powers and the Federal national competition policy of the antitrust laws.
Unidentified Justice: I am not sure I get that, Mr. McMahon.
Is that to say that home rule states, the municipalities are to be treated as the sovereign for the purposes of the Federalism issue that is involved?
Mr. Mahon: No, Your Honor.
I am arguing exactly the other side of that issue.
Unidentified Justice: That is what I thought.
In other words, the state as between the Federal Government and the states, only the states are sovereign.
Mr. Mahon: Yes, Your Honor.
Unidentified Justice: What the states individually want to do as between the state and the municipality is no concern of the Federal issue that is involved.
Mr. Mahon: That's correct, Your Honor.
Unidentified Justice: Is that it?
Mr. Mahon: That is exactly our position.
In that regard, Your Honor had asked previously what would have sufficed here, and I think I can address that question.
In the view of the amici states, the narrowest ground for decision by this Court would be that there was simply no contemplation here that the home rule city of Boulder should engage in the kind of anti-competitive activity alleged in this instance.
There is nothing expressed in the state constitutional provisions conferring power on Boulder that indicates that it should engage in this kind of activity.
That brings up the question then whether that kind of power should be implied.
In the view of the amici states, it should only be implied if it is necessary to effectuate a state regulatory scheme, and in this instance there is no state regulatory scheme.
In the view of the amici states then, the question can be resolved right there for purposes of this case.
Unidentified Justice: Well, could the states lay down regulations binding upon the municipalities in this area?
Mr. Mahon: Your Honor, I think they could.
The Tenth Circuit in Boulder Two has basically said, as we have argued all along, that cable TV is an area of mixed state and local concern.
In that situation, both the state can legislate on it, as the Tenth Circuit has recognized, and the city can, and as long as there is no conflict, both sets of regulations can exist.
If there is a conflict, the state policy would predominate in that situation.
Unidentified Justice: Well, suppose the states had "pre-empted" this area, or undertaken to do so by legislative action.
Mr. Mahon: Correct, Your Honor.
Unidentified Justice: Then what if a municipality said, we have come to the conclusion there is too much television, we don't want any more television, cable or otherwise.
They couldn't do that?
Mr. Mahon: If the municipality decided to completely prohibit, Your Honor, I think that would get more... that's a different situation from this case... that would get more into an area where the municipality might be free to act, but that is a different question from the antitrust immunity question here.
Unidentified Justice: Well, I am only addressing the power question, the governmental power question that Mr. Justice Rehnquist was addressing.
Mr. Mahon: Yes, Your Honor.
I think... I think that the city conceivably could do that, but there would be First Amendment concerns if they were to do it, but what we have envisioned as sort of a hypothetical construct, Your Honor, in terms of the way that state action immunity could be achieved, is that there should be a competition displacement policy clearly articulated, affirmatively expressed, and actively supervised by the state, coming from the state in a particular subject matter area, such as cable TV.
The implementation of that policy could be left at the local level, to the municipalities, as long as there was oversight and review by the state itself.
There are approximately eleven states, Your Honor, that do have oversight of cable TV on a statewide basis, and I think more than half of those allow the municipalities to have a significant amount of input in that area.
When you get into a matter of an area of mixed state and local concern, and this may correct what I said previously if I misspoke, in an area of mixed concern, if the city statute conflicted with the state law, the city's ordinance conflicted with the state statute, the state statute would prevail, so that if the city tried to legislate cable TV out of existence, there would be a good chance that that would not control.
Unidentified Justice: What if the city statute conflicted with the state statute, but conformed to the state constitution?
Mr. Mahon: If it conflicted with the state statute, Your Honor, under Colorado law, and if it were an area of both municipal and state concern, the state statute would predominate.
Unidentified Justice: I am asking a hypothetical question.
What if it conflicted with the state statute but comported with the state constitution granting unlimited home rule to certain--
Mr. Mahon: But it would not conflict, Your Honor, because the state statute conveys so-called unlimited power only on purely local and municipal matters.
That is the extent of it.
Unidentified Justice: --But you are arguing for 33 states, you say.
I mean, conceivably in one of them it might not.
Mr. Mahon: Yes, Your Honor.
In that instance, in our view, if the... if the state legislation conformed to the state constitution, and were not itself violative of the state constitution, it would generally control.
Unidentified Justice: Mr. McMahon, I think I misheard you.
The state would bar all cable television?
Mr. Mahon: No, Your Honor.
I think the Chief Justice asked me, could the city do it, and I think I may--
Unidentified Justice: Well, could the city--
Mr. Mahon: --I may have misspoke in answer to that.
Unidentified Justice: --Yes, that is what I was asking.
Mr. Mahon: My ultimate answer is that I think that is an area of mixed state and local concern, and the state law would predominate, and if there were a conflict on it--
Unidentified Justice: Well, you know, there is a Federal law on that, too.
Mr. Mahon: --That is correct, Your Honor, because cable TV also has interstate implications, as this Court is well aware from its prior decisions.
Unidentified Justice: But in any event, I gather your position is that Colorado does not have presently, in any event, any state policy--
Mr. Mahon: That is exactly correct.
Unidentified Justice: --to displace competition in cable TV with a regulation or monopoly public service.
Mr. Mahon: That is exactly correct, Your Honor, and if I could just--
Unidentified Justice: And to have it, the state legislature has to enact it.
Is that it?
Mr. Mahon: --That is correct, Your Honor.
Now, the contemplation--
Unidentified Justice: And that the constitutional provision, home rule provision does not--
Mr. Mahon: --That does not do that.
A constitutional home rule provision could, in our view, Your Honor, go to the contemplation standard or the compulsion standard that was discussed by this Court in City of LaFayette, but it would have to be more specific than this one to do that, and then there would need to be some comprehensive state policy in the form of legislation besides.
I might just point out that the amici states feel that this case is controlled by the fact that if the home rule municipalities across the country, which number in the thousands, are able themselves to satisfy the state action immunity tests, then the national competition policy will be severely impaired.
Unidentified Justice: --How many states are home rule states?
Nineteen or so?
Mr. Mahon: No, 35, Your Honor--
Unidentified Justice: Thirty-five.
Mr. Mahon: --that have home rule provisions.
Yes, Your Honor.
I believe the chart to the Petitioner's brief--
Unidentified Justice: I take it they differ in degree, though, do they not?
Mr. Mahon: --That is correct, Your Honor.
There are nine states that have powers like Colorado's and a total of 35 where if the city is exercising authority in a particular local area and there is no conflicting state legislation, the city can occupy the field in that instance.
Chief Justice Burger: Mr. Howard?
ORAL ARGUMENT OF JEFFREY H. HOWARD, ESQ., ON BEHALF OF THE RESPONDENTS
Mr. Howard: Mr. Chief Justice, and may it please the Court, I think it is appropriate to begin by analyzing what the city of Boulder did here.
The city of Boulder has one cable TV operator who has operated in town for about 16 years.
Unidentified Justice: How long?
Mr. Howard: About 16 years.
The city wished to go out into the market and solicit other operators to come in and file bids.
It ultimately did that, mailed out 50 requests for bids and published an ad in the Wall Street Journal.
To facilitate that process, and feeling, based on the record before it, that the continued wiring of town by the existing operator would preclude any chance of people coming in from the outside, the city did one thing, and that is the thing before the Court.
It adopted a 90-day suspension of construction for new cable by that operator.
That is the only action.
There is no monopolization of the business.
There is no taking over of the service of cable TV.
There is none of that kind--
Unidentified Justice: Well, Mr. Howard, isn't it clear that the city plans to have an exclusive operator in the future?
Mr. Howard: --As a matter of fact, Your Honor, the city has taken final action in this matter, and has taken the advice--
Unidentified Justice: Exclusive operator in particular portions of the city.
Mr. Howard: --has taken the advice of the state attorney general's office and divided the city into districts, and proposes to issue cable permits for each district.
Unidentified Justice: Doesn't that proceed on the assumption that it would be lawful for the city to grant an exclusive contract?
Mr. Howard: Under state law as I understand it--
Unidentified Justice: No, I am talking about Federal law right now.
Mr. Howard: --I think under Federal law that would be lawful.
It would not be subject to Sherman Act attack.
Unidentified Justice: Why not?
Suppose it was a milk business.
Could they give a license to one dairy to operate in the city in exchange for 5 percent of the revenue, say?
Mr. Howard: Well, if we are talking about the standards that this Court has enunciated in the prior decisions, particularly the City of LaFayette case, I think the city would pass the test, even--
Unidentified Justice: They could do this in any industry.
They could say, we are going to have a monopoly in this particular business, and we will take 5 percent of the profits as the price of the franchise?
Mr. Howard: --Of course, we believe that is not the case in this particular situation.
Unidentified Justice: Well, why isn't it?
Mr. Howard: Because all the city of Boulder has done here is adopt a 90-day suspension on further construction.
The final act, to be sure, was a districting of the city and a granting of franchises in particular areas, but as Mr. Justice Rehnquist points out, cities have since they were created granted that kind of an exclusive franchise to have a railroad car or a city railway on the north side of town and another one on the south side of town.
Unidentified Justice: Or grant one city the inside track.
Mr. Howard: Grant one operator the inside loop and another the outside loop, or even grant one operator the whole town.
Unidentified Justice: Is there any analogy with the old private water suppliers, which I suppose have largely disappeared.
Mr. Howard: They have largely disappeared, Your Honor, but there is a very close analogy there, particularly in the west, where Boulder is, because long ago, private water service was done commercially by private water purveyors.
Part of the home rule process in Colorado at the turn of the century immediately affected water service.
The state of Denver as one of its first acts as a home rule city took over the provision of water service on a monopoly basis in that city, and still provides water service by the city today.
Unidentified Justice: But your position is across the board Regardless of the industry and the physical scarcity and all the rest, a municipality could legitimately require a monopoly in any industry in its city.
Mr. Howard: I don't think that is our position.
No, it is not.
Unidentified Justice: Well, what is your position--
Mr. Howard: Our position--
Unidentified Justice: --with respect to when may they require only... when are they permitted to have monopoly conditions apply?
Mr. Howard: --As in other areas of local governmental action, it is important to consider whether the matter at issue is within the scope of legitimate local concern.
The city of Boulder has no interest in making Rubic's cubes, a popular game the children are using today, and selling them outside the city limits, nor could it grant an exclusive franchise for Rubic's cubes manufacture, but if the city has a special interest in the provision of water service, the city has a special interest in the maintenance of its right of way for transport, communication, and other traditional things that have taken place there, then the equation is a little different.
Unidentified Justice: What is the special interest here?
What is the special interest here?
Mr. Howard: One of the--
Unidentified Justice: Is it that the poles will only hold one set of cables?
Mr. Howard: --One of the things that caused cities to be formed, both in the east and in the west, was the administration of the public right of way.
Perhaps one of the first things was to have a public water service.
Naturally, those pipes went in that public right of way.
Perhaps the next thing was a street for transport, and a street railway, and then there were telegraph lines, and communication cables.
What we have today is another cable.
It is a different technology, a new kind of device the scientists have come up with, but the principle is no different.
When the people of Colorado amended their constitution in 1902 to put that--
Unidentified Justice: I still didn't hear the answer to my question.
What is the special interest of the city here?
Is it the interest in controlling the streets?
Mr. Howard: --The city has several interests, as were revealed in the final districting ordinance that was adopted.
One, of course, is the control of the streets and the public right of way.
Another is to assure diversity of cable service around the community.
The existing operator has consistently refused to provide two-way communication service, consistently refused to provide burglar alarms and fire alarms hooked up to the city police department, and so forth.
One of the things the city went out into the market to see if it could get were people who would provide that kind of service.
The city has a legitimate local interest in those things.
In the Tenth Circuit's opinion in the second Boulder case, the court addressed the legitimate interests of that nature.
Those are unique to cable, I believe, don't apply to water service, stronger interests.
They may also involve the competing interests of Boulder citizens and First Amendment hearing.
Unidentified Justice: Are they interests that make it necessary to have only one operator?
Mr. Howard: I am sorry, Your Honor.
Unidentified Justice: Are they interests which make it appropriate to have only one operator?
Mr. Howard: Well, we would submit that is not the situation here, but the situation here is this.
Unidentified Justice: Only one operator in any portion of the city then.
Mr. Howard: There has only been one operator in any city in the United States, out of 6,000 cable systems, the record here shows.
Across the country.
No more than six have more than one operator.
This Petitioner itself operates 130 systems or more across the country, and all of those are one operator.
Unidentified Justice: Well, maybe there are an awful lot of violations of law going on, but the question really is, is whether or not the city has a legitimate interest in having only one operator, and requiring, I mean, as a matter of law, excluding all but one from the market.
Mr. Howard: Well, in this case, we would say that the justifications for the districting ordinance may well be broader and different than the justifications for a 90-day suspension of construction.
Those justifications have already been litigated in the second Boulder case, and the Court of Appeals has reversed the Trial Court's issuance of an injunction.
That case involves more fully the question of when can a city district itself and issue, in effect, single operator permits for each particular district.
It is not an unusual process.
The city of Los Angeles, the city of New York, the city of Philadelphia, and others have all done that kind of thing.
Cities use that technique for a variety of local purposes.
They use it to try to assure coverage of the entire city or uniform service.
If free market forces were allowed to prevail, you might well have and have had in some cities a situation called cream skimming, when the cable service only hooks up to the rich side of town and doesn't hook up to the other side of the tracks.
Districting gives the cities a better opportunity to police that kind of activity and prevent it, if that is what they believe is in the public interest.
But also... excuse me.
Unidentified Justice: Mr. Howard, you have used the word, or the term "city interest".
Are you analogizing cable TV to the sort of traditional type of businesses affected with the public interest, like providing gas, electricity, water, and transportation?
Mr. Howard: Absolutely, Your Honor.
In fact, there is no contest over that point in this case, because in the Manor Vail case in the Colorado Supreme Court, a subsidiary of this Petitioner was involved, and in their answer in that case, this Petitioner conceded that cable television was a private business affected with the public interest, and in that case they supported the home rule authority of a Colorado city to fix the rates for cable television.
The fact is that cities have been forced to address problems with cable television in a variety of fronts.
Absent price competition, cities have been faced with the question of how do we keep the prices that don't have any price competition in line?
Absent service competition, when there is only one provider, how do they provide high quality service that the market would otherwise provide?
That is the kind of background that is at issue here.
More particularly, there is a traditional line of regulating cable TV in this manner in Colorado, a long prior history of such regulation both from the Federal Government and local governments.
The Federal Communications Commission has since 1972 encouraged local authorities to bring their special expertise, as the Commission called it, to these problems, and has recognized that local cable TV regulation, including the franchise terms, the rates, districting, which is the issue in Boulder Two, and similar cable matters are
"uniquely within the competence of local authorities."
That is at Page 18 of our brief, where we quote from the FCC.
In terms of traditional city functions, cable strung in the right of way is just the latest development in the use of the right of way.
We submit that when the people of Colorado in 1902 amended their constitution to give this local autonomy, they did not contemplate that the constitution would have to be amended for each new technological development.
They gave the local autonomy over that right of way to the local city government, run by nine elected council members.
Colorado cities have always recognized that power and exercised it.
The amicus brief of the Colorado Municipal League here points out that about 85 cities in Colorado have now regulated cable TV.
This pattern dates back to the early sixties.
The Colorado Supreme Court has recognized the validity of this kind of regulation by home rule cities in the Manor Vail case, and the Tenth Circuit has now so held twice in this case, Boulder One and Boulder Two.
In Colorado, however, as in the vast majority of states, the state legislatures have chosen not to adopt legislation on cable.
Unidentified Justice: May you assert the Parker Brown exception without state legislative--
Mr. Howard: Yes, we do, Your Honor.
Unidentified Justice: --You do.
That is your principal argument, I gather, isn't it?
Mr. Howard: That is our principal argument.
Unidentified Justice: That the home rule aspects under the Colorado constitution are sufficient to qualify the municipality for the Parker Brown exception?
Mr. Howard: Well, we basically have two arguments about that, Your Honor.
One is that we meet the test even of the plurality in City of Lafayette, because although the Court indicated that authorization or direction was required--
Unidentified Justice: From the state legislature.
Mr. Howard: --from the state--
Unidentified Justice: Wasn't that opinion rather explicit?
Mr. Howard: --Yes, it was.
Unidentified Justice: In that it required authorization from the state legislature--
Mr. Howard: That's correct.
Unidentified Justice: --which we do not have here.
What we have here, if there is authorization, is in the state constitutional home rule provision.
Is that right?
Mr. Howard: We would submit, Your Honor, that the state legislature is merely the creation of the people of Colorado.
They must look to the constitution, too, for the scope of their authority.
Unidentified Justice: But don't we have to make up our minds here whether sovereign for the purposes of the Parker Brown exception includes a home rule city?
Mr. Howard: I think what the Court has to recognize is whether the state--
Unidentified Justice: Don't we have to decide that?
Mr. Howard: --I think the Court has to decide whether the state has recognized the power of these municipalities in such a way that it passes those tests.
Unidentified Justice: Well, whatever may be the relationships between the states and municipalities, there is still a question whether for purposes of the Parker Brown rule a municipality can ever be sovereign, isn't there?
Mr. Howard: I don't think the Court addressed that in any prior case, other than to say that authorization or direction--
Unidentified Justice: Don't we have to decide it here?
Mr. Howard: --Pardon me?
Unidentified Justice: Don't we have to decide it in this case?
Mr. Howard: I don't think the Court has to, and I submit our second argument for why we meet the test.
We think the kind of tracing back to a legislative mandate that the pluralities seem to contemplate in City of Lafayette is unnecessary where the challenged municipal act is a governmental regulatory enactment, a 90-day moratorium, and applies solely within the city's political jurisdiction, rather than the operation of a business enterprise outside the city's political authority and political jurisdiction, and that in this kind of a case, much different from the private venture of the city outside its boundaries in Lafayette, that kind of tracking back for particular authority is unnecessary.
It is our position that in that case it is sufficient that the city's act is authorized, and the distinction as a matter of state law whether it is authorized by a statute, which can be changed by the legislature at its whim, or by the people in the constitution is irrelevant.
Unidentified Justice: Then you are saying the home rule factor is what is the fulcrum here.
Mr. Howard: Yes, Your Honor, the home rule factor is the fulcrum here that was missing in Lafayette, and a factor that makes the question broader than whether we pass the test.
It makes the question one more of democracy at work at the local level, if you will, because if the rule were changed, if a home rule city could not act within the scope of Parker immunity, absent going back to the legislature for each particular act and a new technology each time, to get a new authorization, in effect the Court under the antitrust laws will be holding that there can be no home rule, because cities cannot afford in this day and time to allow the continued exposure to potential treble damages in all of these areas in which they act that may have an anticompetitive aspect to them to keep on ringing up.
They are going to have to find that safe harbor, and to do so would mean abandoning their whole tradition of home rule.
Unidentified Justice: But this argument, if I understand it correctly, as to the ability of a home rule city to require an exemption just because it is a home rule city, is not confined to the cable TV industry.
It would apply to every industry, wouldn't it?
It would apply to dairies, and they could say, for example, in Boulder, we will fix the prices of all the products sold in this city at such and such a price, and so forth.
Mr. Howard: Well, I think the question again, to answer--
Unidentified Justice: The condition and sale of public utility service on purchasing lamps, as they did in the Cantor case, we can do that in this city.
Mr. Howard: --No, you can't, Your Honor.
I think the basic question would still remain the same.
Cities can only act in areas where they have a legitimate governmental interest.
They may well have no legitimate interest in the sale of lamps, but they certainly have a strong interest in some kinds of local activities.
Cable is one of them, and zoning is the other.
The Court and my worthy opponent now have recognized--
Unidentified Justice: Well, let's say the sale of milk then, or the sale of bread, the sale of foodstuffs in the city.
I suppose they would be exempt there, wouldn't they?
Mr. Howard: --The last term, in the Minnesota Cloverleaf Creamery case, the Court dealt with a question involving non-returnable milk bottles.
There it was the state, to be sure, not a city.
Unidentified Justice: The sale of milk cartons.
Mr. Howard: But there was a principle there involving milk cartons that is relevant here, we submit.
Mr. Justice Brennan, writing for the Court, in Footnote 6, pointed out, and I quote,
"The states are free to allocate lawmaking function to whatever branch of state government they may choose."
And I think the dissent agreed with that notion.
What we've got here, so long as the matter is a legitimate governmental concern, and I am presuming that... not everything in the world is.
So long as it is--
Unidentified Justice: No, but milk, and milk cartons, and price of food, and all that would be subject to the Parker Brown exemption in the home rule states just on the basis of the city's own action.
Mr. Howard: --Not necessarily.
Unidentified Justice: That is your view, isn't it?
Mr. Howard: That is not our position.
Our position is, it would have to be a matter of legitimate local concern.
Milk cartons may not be.
Unidentified Justice: Well, but those examples I gave you would be, would they not, examples of legitimate local concern--
Mr. Howard: I am not certain--
Unidentified Justice: --disposal of milk cartons, and the garbage, and that sort of thing?
Mr. Howard: --I am not certain whether milk cartons would.
It may well be a statewide concern, because of the transport of trash, and bringing in of the materials from outside the city.
It may not be a legitimate local concern.
I think we have to take those case by case.
Unidentified Justice: But the reasons we have a legitimate local concern in cable TV is the interest of the city in two-way communication, and in diversity of programming, and, I suppose, in the revenues in the franchise fee, and in the use of the streets with the cables.
Those are the reasons.
Mr. Howard: Those are among the reasons.
There are more, if I may.
Cable television only arises within a particular city.
This cable system doesn't apply to anyone outside of Boulder.
It only affects Boulder citizens.
It only uses the Boulder right of way.
It only collects money from Boulder citizens, and all of the hardware for the system is in the city of Boulder, and everyone who is hooked up is in the city of Boulder.
So, in terms of distinguishing Boulder from the rest of the political jurisdictions, it affects Boulder's interests much more than it affects an adjacent county or town with whom this system has no interaction.
In that context, I would agree with the Court.
Unidentified Justice: Who makes the decision as to whether or not this is, one, a governmental interest, and the type of governmental interest that is covered by the home rule provision of the constitution?
Who is to make that determination?
Mr. Howard: I would submit, Your Honor, that that is a question of state law to be determined in the first instance by the state courts.
The Supreme Court of the state in the Manor Vail case at least implicitly recognized the home rule power of cities in Colorado to regulate the rates of cable television, and also by the Tenth Circuit Court, which in this case has now twice held that cable television, at least the incidence within the city's limits--
Unidentified Justice: And now we have to decide.
Mr. Howard: --Well, we would submit that some deference is due to the Supreme Court of the state and to the Circuit Court in those decisions, Your Honor.
Unidentified Justice: But that we will have to decide for Boulder and Podunk and Jumpoff and all of the different home rule towns in this country.
Mr. Howard: Your Honor--
Unidentified Justice: And they will be different, won't they?
Mr. Howard: --Your Honor, I think the decision before the Court is not whether to permit it, but whether to stop what has happened now for 20 years, since this new technology began, because the history shows and the record shows that cable regulation has worked, by and large, at the local level, and it continues to work.
It has always been done by cities and towns.
It is being done by Los Angeles and New York and every city in the country.
Unidentified Justice: Always?
Mr. Howard: Since the first inception of this--
Unidentified Justice: You jumped from 20 years to always.
That is a big jump.
Mr. Howard: --Well, in the life of the technology, it may be a long... a big jump, because the technology may only have a short life span, and it may be replaced by the next new technology that comes down the pike, so always may be forever for cable TV if it is replaced next year by some new technology.
Unidentified Justice: I assume, counsel, that a city could pretty well control the location of parking lots by zoning, by its zoning authority.
Could a city with the proper declarations of the matters of traffic congestion, traffic safety, and the need for uniform standards, take over control of all the parking lots in the city?
And if you know, have any cities done that?
Mr. Howard: I think cities have regulated parking lots as part of their land use planning, their zoning.
I am not aware of any cities that have taken over it, but taking over the parking lot would be... perhaps be interpreted as a proprietary kind of activity, if there were city attendants instead of the private attendants charging money to park in the lot.
That is not what we have here, Your Honor, we submit.
The city is not trying to run the cable business.
Unidentified Justice: When the city puts up a lot of these meters along the streets, are they engaging in a governmental or a proprietary function?
Mr. Howard: We would say that they are engaging in a governmental function, and we would say that--
Unidentified Justice: Well, is it much different if they they do that on a collective basis?
Mr. Howard: --The reason we would submit, Your Honor, is that whether it is governmental can't be decided simply because it was once done in a proprietary... by private operators, or that the city gets money from it.
There may well be certain integral functions of the city, administering traffic in the city and things like that, that even though they have a commercial tone to them qualify as an integral governmental function, and the parking meters may well be one of those things.
Water service, we would submit, surely is.
It was once done commercially, with a private vendor of water, taken over by the city, and is now being done by cities for about 80 years in this country, at least in the west.
That, we would submit, surely constitutes an integral local governmental function.
Unidentified Justice: There is nothing in the Federal Constitution that would prevent the state from taking that function over from the cities, is there?
Mr. Howard: Nothing whatsoever in the Federal Constitution.
There may be something in the state constitution, and in Colorado, if a matter has been determined to be purely local, certain incidents of cable TV may be, for all we know, then the state legislature is without power to act.
A perfect example is zoning in Colorado.
Home rule cities are able to zone not by virtue of some state legislative mandate.
There is no legislative mandate for zoning.
The power for home rule cities to zone comes entirely from their status as home rule cities.
And the problem, we would submit, if the Court were to reverse in this case, is exemplified by zoning, long a traditionally recognized local function, because in Colorado and other home rule places, the cities acts could turn to no specific mandate from the state legislature, and in effect their zoning would then be subject to attack under the Sherman Act.
Unidentified Justice: And therefore they would be subject to treble damages every time they turned down a zoning application.
Mr. Howard: Exactly, Your Honor, and there are many kinds of zoning activities that may restrain trade.
The Court has dealt with some in City of Tiberon and American Mini-Theaters recently, different attacks on those zoning ordinances there, but we would submit, if Colorado home rule cities can't find Parker immunity, then the same attacks that were made in City of Tiberon and in American Mini-Theaters now will lie against home rule cities in Colorado, merely by being reformulated under an antitrust theory.
Unidentified Justice: Well, there is quite a difference with the Mini-Theaters case, because there the city of Detroit had no financial interest whatsoever in the operation of the theaters.
It was purely a regulatory situation.
But here, as I understand it, the city gets a percentage of the revenues or something, doesn't it?
Mr. Howard: We submit that that--
Unidentified Justice: Is that correct?
Mr. Howard: --That is correct.
Unidentified Justice: So there is that difference.
Mr. Howard: Let me tell the Court exactly what the facts are.
The facts are, the city gets 2 percent of gross as its franchise fee.
We would submit that does not change the legal character of the act.
In Parker versus Brown--
Unidentified Justice: Well, it gives the city an interest in the business, though.
Mr. Howard: --In Parker versus Brown, the state got $2.50 per ton of raisins, in the state of California.
It gave the state the same kind of an interest.
The more raisins that were sold, the more fee the state of California got, and the Court had no trouble--
Unidentified Justice: Of course, the state's interest there was in curtailing the sale of raisins.
Mr. Howard: --Well, the state's interest there was in keeping the price high, as the opinion--
Unidentified Justice: Curtailing the sale.
Mr. Howard: --indicates.
Unidentified Justice: Will you refresh my recollection?
Does the city contemplate regulating the rates of cable television licensed by it?
Mr. Howard: Those matters have not been decided by the city at this time, Your Honor, and there is nothing in the record to indicate.
The city has thought of all kinds of activities that might be important to be addressed, and rates were one of them, in a model ordinance they floated as a proposal long ago.
Unidentified Justice: In most of the businesses deemed to be affected with the public interest, rates are regulated.
Mr. Howard: Yes, Your Honor, and the pattern across the country in cable television seems to be increasingly to consider rate regulation where there is no price competition.
Unidentified Justice: If the city has a percentage of thee gross, the city's interest may be adverse to the public's.
The higher the rates, the more revenue the city derives.
I don't know whether this system is working or not.
Can you hear me?
Mr. Howard: I can hear you, Your Honor.
Unidentified Justice: All right.
Mr. Howard: Well, there could be multiple situations where a city's interests can be either directed in one direction or the other.
Unidentified Justice: It could be adverse, though, couldn't it?
Mr. Howard: It could be adverse in that case.
I think in this case, with a 90-day moratorium, the city's stake in the enterprise through a 2 percent fee, which is very small, would cut the other way.
It would be in the city's interest to have these people stringing cables everywhere, so that they could get a greater return.
Unidentified Justice: Isn't there a new proposal to increase that fee to 5 percent?
Mr. Howard: No, that is not correct, Your Honor.
Unidentified Justice: I thought I saw something about a 5 percent fee in the record.
Mr. Howard: There was a 5 percent proposal in the model ordinance, but the ordinance that has been adopted in this case, including districting, specifically says... we reprinted that in an appendix to our brief, because it was left out of the joint appendix... specifically says that these people will have no increase in their fee whatsoever.
The impacts beyond zoning go into a variety of other areas.
In our brief we discuss low cost housing, waste regulation, as local and traditional governmental functions which in Colorado are only based upon home rule constitutional power, not based on a statutory authorization.
These kinds of things, we submit, all demonstrate legitimate local concerns which have traditionally been performed at the local level, and which may well have anticompetitive aspects to them.
The significance from our standpoint, we would submit, is that if the Petitioner here were to get its way, Colorado home rule cities would be unable to act because the liability for potential treble damages would force them to go back to the legislature each time and in effect do away with the whole home rule principle of government.
The Colorado Supreme Court has repeatedly held that Article 20 of the Constitution gives home rule cities, and I quote,
"every power theretofore possessed by the legislature."
Thus, by virtue of Article 20, a home rule city is not inferior to the general assembly concerning its local and municipal affairs.
We submit the Court should respect that allocation of power, and that to do otherwise would have disastrous consequences.
First, as a practical matter, it would tear asunder the traditional pattern of home rule, because municipal governments couldn't afford to let the clock of treble damages keep on accruing.
They would have to go back and give up their home rule power.
But far more important than that in the long term, and even more troubling from a constitutional standpoint, if home rule cities can only avoid antitrust litigation and achieve immunity by going back to the state legislature each time for renewed authority, then for practical purposes there cannot be any home rule.
This result, we submit, is a result the Court should consider carefully and should avoid.
This is a result, we submit, that Congress never intended the antitrust laws to bring about, whatever their application to ordinary commercial ventures by cities outside their boundaries.
And this is a result which we submit the principles of our system, which the Court has addressed in the National League of Cities case, and the deference traditionally owed to the state constitutional choice by the people in allocating their legislative power does not allow.
If the Court has no further questions.
Chief Justice Burger: Very well.
You have about two minutes remaining, Mr. Farrow.
ORAL ARGUMENT OF HAROLD R. FARROW, ESQ., ON BEHALF OF THE PETITIONER -- REBUTTAL
Mr. Farrow: Thank you, Your Honor.
I will not be able to cover everything I obviously want to say here.
I would start off by saying, I commend to you the dissent by Justice Markey.
I think that dissent was one of the more extraordinary documents I have had occasion to read as a lawyer, and of course I loved it, but it, I believe, answered almost every point raised by counsel, opposing counsel today.
Let me quickly just indicate to you this whole business of sovereignty, who is the sovereign, the Supreme Court of the State of Colorado has itself in City of Denver versus Sweet, which is quoted in ours, settled the fact that cities are not sovereigns.
They are not city states.
I think the law is closed.
On the question of regulation, now, we are dealing with regulation.
We find here that when it is appropriate to talk in terms of proposed 5 percent, we move from the 90-day moratorium to the total prohibition, which came along later on, it says, until 1984, which happened to be the date on which they believe that they are going to be running this Petitioner completely out of town, will only charge 2 percent.
So that it is sophistry to talk in terms of a 90-day moratorium.
The 90-day moratorium by the very words of the city attorney himself was a contractual ploy.
We will cancel their existing permit, we will enact a new permit with a geographical limitation, they will accept it by performance, by continuing to serve, and we will have them by contract.
If they don't, they can't operate at all.
So that wasn't regulation.
The only regulation, if you want to call it regulation, is the pure prohibition, which came about in July.
They said, no time, no place, no manner, no how.
If you could do that to a newspaper, then maybe you can do it to cable.
It is just exactly the same thing.
They are saying to you that you can't deliver your papers on the other side of town.
I believe that is exactly what we are dealing with.
With respect to the--
Chief Justice Burger: Your time has expired now, Mr. Farrow.
Mr. Farrow: --Thank you, Your Honor.
Chief Justice Burger: Thank you, gentlemen.
The case is submitted.