Before Edwards, Chief Judge, Wald and Sentelle, Circuit Judges.
FOR THE DISTRICT OF COLUMBIA CIRCUIT
School Board of Roanoke County; BellSouth Telecommunications, Inc.; GTE Service Corporation, Intervenors And Consolidated Cases Nos. 93-1653 and 93-1654
Petition for Review of an Order of the Federal Communications Commission
Opinion for the Court filed by Circuit Judge Wald.
Dissenting opinion filed by Circuit Judge Sentelle.
On August 30, 1993, the Federal Communications Commission ("FCC" or "Commission") granted three school boards affiliated with a local telephone company licenses to provide wireless cable service on the Instructional Television Fixed Service ("ITFS") spectrum. These licenses were mutually exclusive with applications made by petitioners, three nonprofit educational organizations, who challenge the grant of these licenses to the school boards on several grounds. We conclude that (1) petitioners waived their challenge to the FCC's rule that wireless cable is not a "cable system" within the meaning of the Cable Communications Policy Act of 1984, Pub. L. No. 98-549, 98 Stat. 2779 (1984) ("Cable Act" or "Act"), by failing to raise it before the agency, (2) the Commission's interpretation, that § 533(b) of the Cable Act, prohibiting telephone companies from providing video programming in their local services area, prohibits only the provision of video programming over a cable system, is a reasonable one, and (3) the FCC's conclusion that the school boards gave adequate assurances of funding is supported by the record and not arbitrary or capricious. Accordingly, we deny the petition for review.
A. The Cable Act and Cross-Ownership Restrictions
Congress enacted the Cable Act in 1984 to "establish a national policy concerning cable communications." 47 U.S.C. § 521(1) (1988). See also American Civil Liberties Union v. FCC, 823 F.2d 1554, 1557-60 (D.C. Cir. 1987) (detailing background and purposes of Cable Act), cert. denied, 485 U.S. 959 (1988). The Act establishes a framework for state and local regulation of cable fees, rates, and service, mandates privacy and consumer protection safeguards for cable systems, and imposes a series of media cross-ownership restrictions. Among these cross-ownership restrictions is § 533(b)(1), which prohibits a telephone company from providing "video programming" within its service area.
Wireless cable operates by transmitting television signals over the microwave bands. Because it broadcasts on the microwave band, it is only accessible to users equipped with specialized antennas and converters. Since the general public lacks this equipment, wireless cable, like cable, offers a private, multi-channel distribution network. Wireless cable, however, operates without any cable or other physical connection between the operator and the viewer.
In a 1990 order, the FCC concluded that a "cable system" as used in the Cable Act "encompasses only video delivery systems that employ cable, wire, or other physically closed or shielded transmission paths ... outside individual buildings," and thus does not include wireless cable or a range of other technologies. In the Matter of Definition of a Cable Television System, 5 F.C.C.R. 7638, 7638 (1990).
C. Instruction Television Fixed Service
The FCC reserves certain segments of the wireless cable microwave band for Instructional Television Fixed Service stations. ITFS stations are authorized to provide "educational, instructional, and cultural material" to students enrolled for credit, for use in training programs, for administrative activities, or in connection with other educational television systems. See 47 C.F.R. § 74.931(a)-(d) (1993).
In order to make ITFS commercially viable, the FCC allows the instructional stations to lease excess capacity to commercial stations. These leasing arrangements are subject to several restrictions, including, for instance, the requirement that the station air at least twelve hours per week of actual ITFS programming during the first two years of operation, and twenty hours thereafter. See id. § 74.931(e). With certain limited exceptions not relevant here, only accredited educational institutions and nonprofit organizations with educational purposes are eligible for ITFS licenses. See 47 C.F.R. § 74.932 (1993). Where more than one eligible institution applies for a mutually exclusive license, the FCC chooses among them based on a point system, which awards points to applicants if they are, among other things, physically located in the community or an accredited school. The applicant with the highest number of points is awarded the license. See 47 C.F.R. § 74.913 (1993).
This case involves competing applications for three ITFS licenses in the Roanoke, Virginia area. In November, 1991, each of three nonprofit educational organizations applied for one of the licenses. Shortly thereafter, three local school boards in affiliation with Botetourt Communications, Inc. ("BCI"), the parent company of a local exchange telephone service provider, applied for the same licenses. In each case, because the school board affiliated with BCI was local and an accredited ...