Before the

Federal Communications Commission

Washington, D.C. 20554

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| In the Matter of                 | * | CC Docket No. 98-6           |
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| Cheyenne River Sioux Tribe       | ) |                              |
| Telephone Authority and US WEST  | * |                              |
| Communications, Inc.             | * |                              |
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| Joint Petition for Expedited     | * |                              |
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| Preempting South Dakota Law      | * |                              |
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MEMORANDUM OPINION AND ORDER

**Adopted:** August 1, 2002 **Released:** August 21, 2002

By the Commission: Commissioner Abernathy issuing a statement;
Commissioner Copps concurring in part, dissenting in part, and issuing a
statement.

# Introduction

1.  On January 22, 1998, the Cheyenne River Sioux Tribe Telephone
    Authority (Telephone Authority) and US WEST Communications, Inc. (US
    WEST)[^1] filed a joint petition requesting that the Federal
    Communications Commission (FCC) exercise its authority under section
    253 of the Communications Act of 1934, as amended (Communications
    Act or Act),[^2] to preempt section 49-31-59 of the South Dakota
    Codified Laws (section 49-31-59)[^3] as applied to the Telephone
    Authority and to Indian Tribes or tribal entities.[^4] Specifically,
    the Telephone Authority and US WEST (Petitioners) contend that the
    South Dakota Public Utilities Commission's (South Dakota Commission)
    disapproval of the proposed sale of three South Dakota telephone
    exchanges by US WEST to the Telephone Authority pursuant to section
    49-31-59 "prohibit\[s\] or ha\[s\] the effect of prohibiting the
    ability of" Indian tribes and tribal entities from providing
    telephone exchange services in South Dakota, and, therefore,
    constitutes a barrier to entry within the meaning of section 253(a)
    of the Communications Act.[^5] Petitioners further contend that the
    application of section 49-31-59 exceeds the authority reserved to
    South Dakota under section 253(b) of the Communications Act and thus
    satisfies the requirements for preemption pursuant to section 253(d)
    of the Act.[^6] Petitioners also contend that the South Dakota
    Commission's application of section 49-31-59 is preempted by
    operation of federal law and policy that promotes tribal sovereignty
    and self-government.[^7] On January 28, 1998, the FCC issued a
    Public Notice seeking comment on the issues raised by
    Petitioners.[^8]

2.  For the reasons described below, we reject the South Dakota
    Commission's procedural claim that a decision of the South Dakota
    Supreme Court that affirmed the South Dakota Commission's
    disapproval of the sales precludes the FCC from considering the
    section 253 issue raised by the Petitioners. We therefore address
    the section 253 issue and conclude that the application of section
    49-31-59 is not preempted under section 253. Specifically, and
    assuming arguendo that the state's requirements should be deemed a
    barrier to entry under section 253(a), we conclude that the state's
    action is not preempted because it falls within the class of
    regulations that are permissible under section 253(b). Finally, we
    do not address here whether the South Dakota Commission's decision
    is preempted by federal law promoting tribal sovereignty and
    self-government, given that the South Dakota Supreme Court has
    already rejected Petitioners' preemption claim.[^9]

# Background 

3.  In 1994, US WEST agreed to sell 67 exchanges located in South Dakota
    to a consortium of 20 telecommunications companies, which included
    the Telephone Authority.[^10] The Telephone Authority is a wholly
    owned subsidiary of the Cheyenne River Sioux Tribe, a federally
    recognized Indian tribe, and provides service primarily within the
    exterior boundaries of the Cheyenne River Sioux Reservation in South
    Dakota.[^11]

4.  Under the proposed sales agreements, US WEST agreed to sell three
    exchanges to the Telephone Authority. These exchanges include:
    McIntosh, which serves the City of McIntosh and surrounding farms
    and ranches; Morristown, which serves the City of Morristown and
    surrounding areas; and Timber Lake, which serves the City of Timber
    Lake and surrounding areas. Approximately half of the Timber Lake
    exchange is within the boundary of the Cheyenne River Sioux
    Reservation. The remaining portion of that exchange and all of the
    McIntosh and Morristown exchanges are within the exterior boundaries
    of the Standing Rock Sioux Reservation.[^12] The activities of US
    WEST associated with its ownership and operation of the three
    exchanges are regulated by the South Dakota Commission.[^13] Upon
    consummation of the exchange sales agreement, the Telephone
    Authority, through its subsidiary, Owl River, would replace US WEST
    providing service on those portions of the Reservations served by
    the exchanges.[^14]

5.  Shortly after US WEST and the consortium announced the proposed
    sales, the South Dakota legislature enacted section 49-31-59 which
    provides:

    The Legislature recognizes that the sale of telephone exchanges has
    a profound impact upon South Dakota, especially during a time when
    the world is undergoing a revolution in telecommunications
    technology. Because the sale of any exchange in our state directly
    affects the continued vitality and viability of rural South Dakota
    during that revolution, it is the Legislature's intent that the sale
    of each exchange be held to a high degree of scrutiny. Any sale of a
    telecommunications exchange shall be approved by a vote of the
    Public Utilities Commission. A separate vote is required on the sale
    of each exchange. In voting, the commission shall, if applicable,
    consider the protection of the public interest, the adequacy of
    local telephone service, the reasonableness of the rates for local
    service, the provision of 911, Enhanced 911, and other public safety
    services, the payment of taxes, and the ability of the local
    exchange company to provide modern, state-of-the-art
    telecommunications services that will help promote economic
    development, tele-medicine, and distance learning in rural South
    Dakota.[^15]

6.  On July 31, 1995, after reviewing the proposed exchange sales, the
    South Dakota Commission approved, subject to certain conditions, the
    sale of 63 of the 67 exchanges.[^16] These conditions required that
    the buyers not increase local rates for 18 months, not recover any
    acquisition adjustment through their rates or from federal or state
    universal service funds, honor all then existing US WEST contracts
    and agreements arising from the operation of the exchanges being
    sold, continue to offer all services offered by US WEST in the
    purchased exchanges, and not change any extended area service
    arrangements without prior South Dakota Commission approval.[^17] In
    contrast, the South Dakota Commission denied US WEST's sale of the
    McIntosh, Morristown, and Timber Lake exchanges to the Telephone
    Authority.[^18]

7.  The South Dakota Commission addressed the three proposed exchange
    sales in three separate orders.[^19] In each order, the South Dakota
    Commission made specific findings of fact.[^20] The South Dakota
    Commission concluded that approval of the sales would constitute an
    improper delegation of authority pursuant to South Dakota law and,
    therefore, the South Dakota Commission had no authority to approve
    the sale of the exchanges.[^21] The South Dakota Commission further
    concluded that it lacked the authority to enter into a tax agreement
    with a tribal entity, and that approval of the sales would have
    significant, adverse tax consequences to the taxpayers located in
    the cities, counties, and school districts within the proposed sale
    exchanges due to the Telephone Authority's assertion that the state
    lacks the authority to enforce the collection of taxes on the
    Reservations.[^22]

8.  Petitioners appealed the South Dakota Commission's orders to the
    Circuit Court of South Dakota (South Dakota Circuit Court).[^23] The
    South Dakota Circuit Court concluded that the South Dakota
    Commission's jurisdiction over the proposed sales of US WEST's
    exchanges was not preempted by federal law and that the Commission's
    exercise of jurisdiction over the proposed sales did not unlawfully
    infringe on the right of the Cheyenne River Sioux Tribe to make its
    own laws and be governed by them.[^24] However, the court did find
    that the denial of the sales had been erroneously based on the
    Telephone Authority's refusal to waive its sovereign immunity, that
    the South Dakota Commission had erroneously concluded that approval
    of the sales would constitute an improper delegation of its
    authority, and that the South Dakota Commission had failed to
    analyze each of the criteria enumerated in section 49-31-59.[^25]
    The South Dakota Circuit Court remanded to the South Dakota
    Commission for reconsideration, but stated that the South Dakota
    Commission could \"consider the effects of immunity if relevant
    under the statutory criteria\" in section 49-31-59.[^26]

9.  On remand, the South Dakota Commission reevaluated the proposed
    sales and again denied them.[^27] The South Dakota Commission
    concluded that it had jurisdiction over US WEST and the Telephone
    Authority and found that approval of the sales would not be in the
    public interest because the South Dakota Commission lacked: (1) an
    enforcement mechanism to require the Telephone Authority to pay
    gross receipts taxes and there would be significant loss of tax
    revenue for the cities, counties, and school districts located
    within the exchanges (US WEST had paid gross receipts taxes on its
    revenue for those exchanges to South Dakota); (2) regulatory control
    to set conditions of sale that must be followed by the Telephone
    Authority; (3) the ability to require as a condition of sale that
    the Telephone Authority offer all existing US WEST services; (4) the
    ability to require the Telephone Authority to honor all existing US
    WEST contracts and agreements; (5) regulatory control and the
    ability of the majority of subscribers to vote or have a political
    voice in the Telephone Authority which could negatively affect
    adequacy of service; (6) the ability to require that the Telephone
    Authority not increase the current local rates for 18 months; (7)
    the ability to require that the Telephone Authority not change any
    current extended area service arrangements without prior approval by
    the South Dakota Commission; and (8) the ability to require the
    Telephone Authority to make any improvements necessary for the
    public's safety, convenience, and accommodation as allowed by South
    Dakota state law.[^28] Petitioners appealed the denial of the sales
    to the South Dakota Circuit Court, which subsequently affirmed the
    South Dakota Commission\'s decision.[^29]

10. On March 25, 1998,[^30] the Petitioners appealed the South Dakota's
    Circuit Court's decision in *Cheyenne River II* to the South Dakota
    Supreme Court (South Dakota Supreme Court).[^31] The South Dakota
    Supreme Court affirmed the South Dakota Commission's denial of US
    WEST's sale of the three exchanges.[^32]

11. The South Dakota Supreme Court addressed first Petitioners' claims
    that the South Dakota Commission's assertion of jurisdiction over
    the sale of that portion of the Timber Lake exchange located on the
    Cheyenne River Sioux Indian Reservation infringed on the Tribe's
    right of tribal self-government, was barred by federal preemption,
    and violated well-established principles of federal Indian law.[^33]
    The court held that the South Dakota Commission's regulation of US
    WEST was not an improper infringement upon the Cheyenne River Sioux
    Tribe's right to self-government. The South Dakota Supreme Court
    found that extensive congressional and legislative authority
    authorized the South Dakota Commission to regulate the activities of
    US WEST and its sale of telephone exchanges, whether on or off the
    reservation.[^34] The court opined that "\[t\]he regulatory scheme
    of telecommunications services specifically grants \[the South
    Dakota Commission\] authority and jurisdiction over intrastate
    facilities." [^35] The court noted that this authority is extensive
    and crucial to the overall regulatory scheme[^36] and included
    "'general supervision and control of all telecommunications
    companies offering common carrier services within the state to the
    extent such business is not otherwise regulated by federal law or
    regulation.'" [^37]

12. The South Dakota Supreme Court rejected Petitioners' claim that
    because US WEST and the Telephone Authority had entered into a
    consensual, contractual agreement, the tribe had jurisdiction over
    US WEST's on-reservation activities in accordance with the exception
    to state jurisdiction over nonmembers of a tribe set out in
    *Montana v. United States*.[^38] The court determined that US WEST's
    sale to the Tribe did not come under this exception because the
    contract for the purchase of the exchange was dependent upon the
    South Dakota Commission's approval of the sale, not upon the
    consensual agreement between US WEST and the Telephone
    Authority.[^39]

13. The South Dakota Supreme Court also disagreed with Petitioners'
    contention that the South Dakota Commission's authority to approve
    the sale of the portion of the Timber Lake exchange located on the
    Reservation was preempted by "'federal interests in promoting
    economic development and self-sufficiency for Indian tribes.'"[^40]
    The court found that Petitioners had failed to cite a specific
    federal statute that preempts the South Dakota Commission's
    authority or that encourages tribal regulation of telephone
    exchanges.[^41] Moreover, the South Dakota Supreme Court also found
    that the primary purposes and objectives of Congress in regulating
    telecommunications are to protect telecommunications' consumers by
    ensuring adequate facilities and reasonable rates, and that the
    South Dakota Commission's regulatory authority furthers these
    objectives and does not interfere with them.[^42]

14. The South Dakota Supreme Court also determined that the South Dakota
    Commission's assertion of jurisdiction over the sale of the
    on-reservation portion of the Timber Lake exchange did not violate
    well-established principles of federal Indian law. Petitioners
    argued that the South Dakota Commission's disapproval of the sale
    was "implicitly based on the Tribe's failure to waive its sovereign
    immunity and therefore 'unduly burdesome,' 'overly intrusive,' and
    thus a violation of the United States Supreme Court's holding in
    *Three Affiliated Tribes of Fort Berthold Reservation v. Wold
    Engineering*.[^43] The South Dakota Supreme Court found that the
    South Dakota Commission had followed the remand instructions in
    *Cheyenne River I.* It had considered and denied US WEST's proposed
    sale of the three exchanges based upon findings of fact on each of
    the factors enumerated in section 49-31-59, not upon the Tribe's
    refusal to waive its sovereign immunity.[^44]

15. After addressing Petitioners' claims with regard to the South Dakota
    Commission's jurisdiction over the sale of the of that portion of
    the Timber Lake exchange located on the Cheyenne River Sioux Indian
    Reservation, the South Dakota Supreme Court addressed Petitioners'
    claim that the South Dakota Commission's decisions should be
    reversed because the sales of the Morristown, McIntosh, and the
    off-reservation portion of the Timber Lake exchange satisfied the
    statutory requirements of section 49-31-59. The court disagreed,
    finding that the South Dakota Commission properly applied the
    factors listed in section 49-31-59 when considering the sale of the
    off-reservation portion of the Timber Lake exchange, the Morristown
    exchange, and the McIntosh exchange.[^45]

16. The South Dakota Supreme Court also rejected Petitioners' claim that
    the refusal to approve the sales constituted a denial of equal
    protection in violation of the Fourteenth Amendment of the United
    States Constitution and Article VI, § 18 of the South Dakota
    Constitution.[^46] Petitioners argued that the South Dakota
    Commission's reliance on the potential effect of the Telephone
    Authority's sovereign immunity caused it to treat the Telephone
    Authority disparately from other successful bidders when denying
    approval of the sale. The court determined that section 49-31-59
    passes "rational basis scrutiny" and that the South Dakota
    Commission's application of the statute to the exchange sales did
    not constitute a denial of equal protection under the law.[^47]

17. Finally, Petitioners argued that the South Dakota Commission and the
    South Dakota Circuit Court abused their discretion by failing to
    reopen the record on remand. Petitioners claimed that it was an
    abuse of discretion for the South Dakota Commission and the South
    Dakota Circuit Court to refuse to take judicial notice of the
    Telephone Authority's newly adopted dispute resolution procedures
    and the provisional certificate of convenience and necessity given
    to the Telephone Authority by the Standing Rock Sioux Tribe to
    operate the exchanges within the boundaries of the Standing Rock
    Sioux Reservation. The South Dakota Supreme Court disagreed. The
    South Dakota Supreme Court held that the South Dakota Circuit
    Court's order limiting the scope of the remand to the record before
    it and to the issues that the South Dakota Circuit Court determined
    the South Dakota Commission needed to address was within the scope
    of the South Dakota Circuit Court's discretion.[^48] No appeal was
    taken to the United States Supreme Court.[^49]

# Section 253 Preemption

## Procedural Issues Relating to Section 253 

18. As a preliminary matter, South Dakota challenges the FCC's
    jurisdiction to resolve whether section 49-31-59 is preempted under
    section 253. According to South Dakota, the South Dakota Supreme
    Court has already determined that the South Dakota Commission has
    authority over the transfers in question, and it believes that
    disposition is binding upon the FCC.[^50] South Dakota supports its
    assertion with reference to the *Rooker-Feldman* doctrine which, it
    argues, prevents the FCC from ruling in favor of Petitioners.[^51]
    South Dakota also contends that "under the doctrine of preclusion, a
    federal agency must give the preclusive effect to the state court
    determination of jurisdiction of the \[South Dakota
    Commission\]."[^52]

19. We do not agree that the decision of the South Dakota Supreme Court
    in *Cheyenne River v. South Dakota* precludes our review of the
    sales of the exchanges under section 253.[^53] The doctrine of
    preclusion applies in circumstances in which a court has previously
    addressed the legal question at issue.[^54] Here, the South Dakota
    Circuit Court determined that Section 253(d) leaves the question of
    preemption under section 253 "to the exclusive jurisdiction of the
    Federal Communications Commission" and declined to remand that issue
    back to the South Dakota Commission. [^55] The Circuit Court's
    decision was not appealed to the South Dakota Supreme Court and the
    South Dakota Supreme Court likewise made no determinations regarding
    preemption under section 253.[^56] None of the decisions cited by
    the South Dakota Attorney General suggests that we are precluded
    from resolving a federal claim that a state court expressly has
    declined to address because, in its view, the issue falls within our
    exclusive jurisdiction. As to the issue of preemption under section
    253, we therefore conclude that we are not bound by any prior
    decision of the South Dakota Supreme Court.

## Preemption under section 253

### Background

20. Subsection 253(a) of the Act generally precludes state or local
    statutes or requirements that "prohibit or have the effect of
    prohibiting the ability of any entity to provide any interstate or
    intrastate telecommunications service."[^57] Subsection 253(d)
    requires that the FCC preempt such statutes or requirements unless
    the requirement is saved by the provisions of subsection 253(b),
    which provides that nothing in section 253:

    shall affect the ability of a State to impose, on a competitively
    neutral basis and consistent with section 254, requirements
    necessary to preserve and advance universal service, protect the
    public safety and welfare, ensure the continued quality of
    telecommunications services, and safeguard the rights of
    consumers.[^58]

### Discussion

#### Federal Indian Law Issues

21. At the outset, many of the arguments that parties set forth under
    section 253 involve issues that have been resolved by the South
    Dakota courts. Petitioners argue that the application of section
    49-31-59 discriminates against Indian tribes and tribal entities
    that possess tribal immunity.[^59] Petitioners assert that the South
    Dakota Commission permitted all other sales reviewed, except one
    proffered by a municipality, "because it could regulate and tax the
    purchasers without running into problems of the effect of sovereign
    immunity."[^60]

22. South Dakota, in contrast, contends that the Telephone Authority was
    not singled out for disparate treatment. It asserts that, in
    reality, Petitioners are reasserting an equal protection argument
    that Petitioners have already litigated before the South Dakota
    Supreme Court and that they are precluded from raising again.[^61]

23. We emphasize that our decision here is limited to matters that
    properly fall within our authority under section 253. We do not
    address here issues concerning whether the South Dakota Commission's
    decision could, or should, be deemed to have violated federal Indian
    law as articulated by the United States Supreme Court. Those issues
    were fully litigated before, and resolved by, the South Dakota
    Supreme Court, and the Petitioners did not seek further judicial
    review of those decisions. The South Dakota Supreme Court ruled that
    the South Dakota Commission did not deny approval of the sale based
    on the Tribe's failure to waive its sovereign immunity.[^62] The
    South Dakota Supreme Court also ruled that the South Dakota
    Commission's application of section 49-31-59 did not constitute a
    denial of equal protection under the Fourteenth Amendment of the
    United States Constitution.[^63] We do not intend to re-litigate
    those issues here under the guise of exercising our authority under
    section 253.

#### Section 253(a) 

24. The parties vigorously dispute whether the application of section
    49-31-59 to the sale of the US WEST exchanges violates section
    253(a) in these circumstances. The Petitioners contend that the
    South Dakota Commission's application of section 49-31-59
    constitutes a barrier to tribal entities that seek to own and
    operate telephone exchanges in South Dakota.[^64] The South Dakota
    Commission counters that section 253(a) does not apply in this
    instance because the proposed sales would not have furthered
    competitive entry into the market but would simply have substituted
    a new provider of monopoly service.[^65]

25. Although the FCC's decisions thus far provide little guidance
    whether subsection 253(a) would cover application of section
    49-31-59, it is clear that the courts have found violations of
    section 253(a) in cases where competitive entry was not at
    issue.[^66] Moreover, the Commission concluded in the *Texas
    Preemption Order* that "section 253(a) bars state or local
    requirements that restrict the means or facilities through which a
    party is permitted to provide service, *i.e.,* new entrants should
    be able to choose whether to resell incumbent LEC services, obtain
    incumbent LEC unbundled network elements, utilize their own
    facilities, or employ any combination of these three options."[^67]
    We need not decide, however, whether section 49-31-59 falls within
    the scope of subsection 253(a) in this instance because, even
    assuming arguendo that it does, we also believe the state's
    application of the statute falls within the protected class of
    regulations covered by subsection 253(b).

#### Section 253(b)

26. Section 253(b) excludes from the scope of the FCC's preemption
    powers certain defined state or local requirements that are
    "competitively neutral," "consistent with section 254," and
    "necessary" to achieve the public interest objectives set forth in
    section 253(b).[^68]

27. The parties disagree on whether application of 49-31-59 falls within
    the protection of section 253(b). Petitioners contend that the South
    Dakota Commission cannot base its denial on its inability to enforce
    its requirements because regulatory oversight is not necessary to
    achieve the public interest purposes listed in section 253(b).[^69]
    In support, Petitioners assert that there is no dispute that the
    Telephone Authority in the past has safeguarded the rights of its
    subscribers. Petitioners also assert that the South Dakota
    Commission has found that the Telephone Authority protects the
    public safety and welfare, provides quality telecommunications
    services, and is capable of advancing universal service.[^70]
    Petitioners contend that the South Dakota Commission's actual
    concern is its inability to collect taxes, which is not set forth in
    section 253(b) as a permissible justification for state action.[^71]

28. The South Dakota Commission, in contrast, contends that its conduct
    is protected by section 253(b) because otherwise, it would be unable
    to set and enforce conditions similar to the conditions it placed
    upon the sixty-three approved sales or to assure the adequacy of the
    Telephone Authority's future services to the affected subscribers.
    [^72] The South Dakota Commission acknowledges that one of the
    reasons for denying the sale involved the loss of significant tax
    revenues, but other reasons included the uncertainty over the
    recourse a customer would have to complain about service problems
    and unregulated rates of a monopoly provider not subject to its
    jurisdiction.[^73] In support, South Dakota observes that the South
    Dakota Supreme Court affirmed the South Dakota Commission's findings
    that if the Telephone Authority obtained ownership of the exchanges
    the legal and regulatory environment created would be unfair to
    consumers, and deprive the South Dakota Commission of its ability to
    enforce conditions of sale to safeguard current and future
    service.[^74]

29. Section 253(b) grants the States broad regulatory authority to
    achieve the public interest objectives set forth in a manner that is
    competitively neutral and consistent with section 254. The FCC has
    interpreted section 253(b) in a manner that is designed "to foster
    the overall pro-competitive, de-regulatory framework that Congress
    sought to establish through the \[Act\]."[^75] Thus, the regulatory
    authority that section 253(b) reserves to the states, although
    broad, is nonetheless subject to preemption when it is exercised in
    a manner that conflicts with the pro-competitive and other goals of
    the Act.

30. We conclude that, under the facts presented, preemption is not
    warranted here. Unlike the Commission's decisions under section 253
    thus far, the circumstances here involve a carrier of last resort. A
    state's ability to protect consumers under its regulatory authority
    is particularly important where consumers have only one choice of
    telecommunications service provider. We therefore find unpersuasive
    the Telephone Authority's contention that it is unnecessary for the
    South Dakota Commission to be able to impose and enforce its
    requirements. Moreover, the Telephone Authority's record of good
    service in the past on the five exchanges it currently owns, which,
    for the most part, fall within the boundary of the Cheyenne River
    Sioux Reservation, does not guarantee the quality of service that
    the Telephone Authority would provide in the future to the three
    different exchanges at issue here. We note that the majority of the
    service territory that the Telephone Authority seeks to acquire is
    outside the boundary of the Cheyenne River Sioux Reservation. Thus,
    the majority of customers to whom the Telephone Authority seeks to
    provide service are not members of the Cheyenne River Sioux Tribe,
    and many of them are not members of any Indian tribe. Thus, we are
    particularly cognizant of the state's interest in protecting any
    such consumers that do not fall within the Tribe's jurisdiction.

31. The South Dakota Commission's reasons for denying the sale of the
    exchanges, moreover, fall within core regulatory functions of rate
    regulation and other consumer protection mechanisms that are
    traditionally exercised by the states.[^76] Even if it would have
    regulatory jurisdiction to perform these functions, the South Dakota
    Commission determined that it would be unable to enforce them.[^77]
    As the FCC has recognized, means such as service quality
    requirements and legitimate enforcement actions, are generally
    envisioned by section 253.[^78] In this instance, however, if we
    were to preempt, the South Dakota Commission would be unable to use
    such means to ensure that the transfer would be in the public
    interest because the South Dakota Commission would lack effective
    enforcement mechanisms. We find nothing in the record that
    undermines the South Dakota Commission's determination that the
    alternative enforcement vehicles suggested by Petitioners would be
    impractical.[^79] We therefore find that the ability of the South
    Dakota Commission to enforce such reasonable conditions is an
    integral and necessary part of its regulatory scheme to protect the
    public interest as defined by the South Dakota Legislature.[^80] We
    note that the South Dakota Commission and Petitioners engaged in
    settlement negotiations which ultimately were unsuccessful.[^81] On
    its face, section 253(b) does not envision that states must
    relinquish effective and practical regulatory enforcement authority
    in order to avoid federal preemption, particularly in circumstances
    in which the carrier involved would be the carrier of last resort.

32. We also find that the South Dakota Commission applied 49-31-59 in a
    manner that is competitively neutral and consistent with section
    254, as required by section 253(b). As to competitive neutrality, we
    find that section 49-31-59 and its application in this instance is
    competitively neutral, consistent with section 253(b). We have
    construed "competitively neutral" to require state requirements for
    market entry to be functionally equivalent for incumbents and new
    entrants.[^82] As noted above, however, this case does not involve
    issues of competitive entry that have been the subject of the FCC's
    decisions under section 253 thus far. Nor is there any reason to
    believe that application of 49-31-59 affects the Telephone
    Authority's ability to utilize any of the competitive entry methods
    provided for in the Act.

33. Moreover, we find that section 49-31-59 is uniform in its language,
    application, and effect. The statute treats the sale of all
    exchanges that are subject to the South Dakota Commission's
    jurisdiction uniformly. Each sale is reviewed with a high degree of
    scrutiny applying the same factors to determine whether the sale to
    the prospective purchaser is in the public interest. Such scrutiny
    was applied equally to the proposed sale of each of the 67 US
    WEST-owned exchanges.[^83] Neither the language of section 49-31-59
    nor the application of it distinguishes as to classes of potential
    purchasers, a distinction we found to violate section 253(b) in the
    *Texas Preemption Order.*[^84] Section 49-31-59 also has a uniform
    effect, in that it requires the Telephone Authority to adhere to the
    same public interest conditions as all other potential purchasers
    and it ensures that all consumers have the regulatory protection of
    the South Dakota Commission. And, as discussed above, we decline to
    utilize our section 253 authority as a vehicle to re-litigate issues
    of federal Indian law matters concerning sovereign immunity that
    already have been resolved by the South Dakota Supreme Court.

34. We also find that the application of section 49-31-59 is consistent
    with section 254, as required by section 253(b).  The conditions
    imposed by the South Dakota Commission on their face do not conflict
    with the requirements of section 254.  Nor does the record contain
    any evidence that application of 49-31-59 conflicts with section
    254.[^85]

35. Based upon the foregoing, we find that the instant application of
    section 49-31-59 is competitively neutral, consistent with section
    254, and is necessary to achieve the public interest objectives
    enumerated in section 253(b). We therefore conclude that preemption
    is not required pursuant to section 253(d).

# general preemption issue

36. Finally, Petitioners also claim that the South Dakota Commission's
    application of section 49-31-59 violates federal law promoting
    tribal sovereignty and self-government.[^86] Petitioners reference
    various federal Indian statutes, among other things, to support
    their claim.[^87] We do not address here issues concerning whether
    the South Dakota Commission's decision could, or should, be deemed
    to have violated these other federal laws. The South Dakota Supreme
    Court has already rejected Petitioners' preemption claim with
    respect to these statutes and federal policies and we see no basis
    for the Commission to re-litigate these issues.[^88]

# ORDERING CLAUSE

37. Accordingly, IT IS ORDERED, pursuant to sections 4(i) and 253 of the
    Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), 253,
    that the Petition for Preemption filed by the Cheyenne River Sioux
    Tribe Telephone Authority, and US WEST Communications, Inc., IS
    DENIED.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

**SEPARATE STATEMENT OF**

**COMMISSIONER KATHLEEN Q. ABERNATHY**

> *Re: Cheyenne River Sioux Tribe Telephone Authority and U S WEST
> Communications, Inc., and Joint Petition for Expedited Ruling
> Preempting South Dakota Law, Memorandum Opinion and Order, CC Docket
> No. 98-6.*

I agree that the record in this proceeding does not support a finding of
preemption under section 253 of the Act. I want to emphasize, however,
that tribal authorities should not be forced to forfeit their sovereign
immunity as a condition of purchasing a local exchange. The record
suggests that the refusal of the Cheyenne River Sioux Tribe Telephone
Authority to waive its sovereign immunity may have been the primary
reason the South Dakota Public Utilities Commission would not approve
the Telephone Authority's purchase of the U S WEST exchanges. Indeed,
the U.S. Department of Justice and Department of the Interior contend
that the "underlying, unspoken basis for \[the\] denial was the Tribe's
refusal to waive its sovereign immunity."[^89]

Nevertheless, the South Dakota Supreme Court squarely held that the
PUC's denial of the proposed transfers was *not* based on the Telephone
Authority's refusal to waive sovereign immunity, and thus did *not*
violate federal law favoring tribal self-governance.[^90] Whether or not
we agree with that holding ― which petitioners did not appeal to the
U.S. Supreme Court ― we are legally barred from relitigating it
here.[^91]

If we refrain from second-guessing the court's findings, as we must,
then we are constrained to hold that the state commission's denial of
the proposed transfers did not run afoul of section 253. I begin with
the assumption that the state law at issue (section 49-31-59)
"prohibit\[s\] or has the effect of prohibiting" the Telephone Authority
from providing telecommunications service. 47 U.S.C. § 253(a).[^92] The
question then becomes: Was section 49-31-59 as applied necessary to
promote any of the public interest goals enumerated in section 253(b)?
If I were writing on a blank slate, I might find that denying the
transfers was not necessary to further any of those goals, because I
have no reason to believe that the Telephone Authority would not provide
excellent service. But the state PUC had several significant concerns
regarding the proposed transfers. And given the South Dakota Supreme
Court's holding that the PUC "properly applied the statutory
factors,"[^93] and, consequently, that it appropriately "determined that
the sales would not be in the public's best interest,"[^94] I believe it
would overstep our bounds to use section 253 as a collateral means of
overturning this judgment.

Moreover, even if the record provides some support for petitioners'
arguments, they bear a heavy burden in arguing that the state PUC lacks
authority to deny the transfers at issue. As the South Dakota Supreme
Court noted, "\[t\]he authority of the PUC is extensive and crucial to
the overall regulatory scheme."[^95] While section 253's preemptive
reach is broad in scope, neither this Commission nor any court has ever
remotely suggested that it precludes state commissions from regulating
the transfer of facilities owned by a carrier of last resort.

If, in the future, tribal authorities are denied permission to acquire
exchanges solely because of their unwillingness to waive sovereign
immunity, I hope they will challenge such rulings as inconsistent with
federal law protecting tribal self-sufficiency.[^96] I also believe that
section 253 could conceivably provide a remedy in some circumstances.
But if a tribe chooses to litigate the general federal preemption
question in state court, obtains a fair hearing, and receives a final
judgment, then section 253 should not be turned into a vehicle to
re-litigate that question.

**STATEMENT OF COMMISSIONER MICHAEL J. COPPS**

**CONCURRING IN PART, DISSENTING IN PART**

*In the Matter of: Cheyenne River Sioux Tribe Telephone Authority and US
West*

*Communications, Inc., Joint Petition for Expedited Ruling Preempting
South Dakota Law*

The matter before the Commission requires careful balancing of the
critical issues of consumer protection and tribal sovereignty. I do not
believe that the majority's decision here strikes the correct balance
between the two, and thus I dissent in part from the decision of the
majority.

In 1994, US WEST sought approval to sell 67 telephone exchanges in South
Dakota to small local telephone companies; the South Dakota Public
Utility Commission (PUC) approved the sale of 63 of these exchanges. Of
the four that were not approved, three were sales to the Cheyenne River
Sioux Tribe Telephone Authority (CRSTTA), a tribally owned telephone
company.

The denial of these transfers by the South Dakota PUC is directly
related to the fact that the CRSTTA is owned by an Indian tribe.
Although the PUC did not expressly require the tribe to waive its
sovereign immunity as a condition of approval of the sale, the PUC
nonetheless based its denial of the transfers to the CRSTTA on its lack
of enforcement and taxation authority over the tribally-owned entity.
The PUC made this decision pursuant to South Dakota Codified Law §
49-31-59, which requires the PUC to look at, among other things "the
payment of taxes, and the ability of the local exchange company to
provide modern, state-of-the-art telecommunication services" prior to
approving any transfers. While the statute on its face may be applied in
a competitively neutral manner, it was not so applied here.

The Commission's authority to preempt local laws in the area of common
carrier regulation is grounded in §253 (a) of the Communications Act
which states that "no State or local statute...may prohibit or have the
effect of prohibiting the ability of any entity to provide any
interstate or intrastate telecommunications service." Section 253(b) of
the Act, however, recognizes that state laws may not be preempted if
they are competitively neutral and safeguard the rights of consumers.
The question for the Commission therefore, is whether the statute serves
as a barrier to entry and whether, if not, the statute was applied in a
manner that is nonetheless competitively neutral.

Clearly, as applied by the South Dakota Public Utility Commission, the
statute serves as a barrier to entry to tribally owned telephone
companies. As the Commission has previously stated "\[S\]ection 253
expressly empowers -- indeed, obligates -- the Commission to remove any
state or local legal mandate that 'prohibit\[s\] or has the effect of
prohibiting' a firm from providing any interstate or intrastate
telecommunications service...this provision commands us to sweep away
not only those state or local requirements that explicitly and directly
bar an entity from providing any telecommunications service, but also
those state or local requirements that have the practical effect of
prohibiting an entity from providing service...\[that\] materially
inhibit or limit the ability of any competitor or potential competitor
to compete in a fair and balanced legal and regulatory
environment."[^97]

Denial of the transfers of US West exchanges to the CRSTTA was not
competitively neutral and not necessarily in the interests of consumers.
The effect of the decision of the PUC is to prevent Indian-owned
telephone companies from purchasing exchanges. This result is not
competitively neutral. Further, the CRSTTA has a record of many years of
good service to its customers, many but not all of whom, reside on the
Cheyenne River Sioux reservation. The PUC, therefore, has no reason to
believe that the CRSTTA would not provide the same quality of service to
its customers in the newly acquired exchanges. Therefore, while the
statute could have been applied in a manner consistent with the Act, I
do not believe it has been so applied. I would preempt the application
of the South Dakota statute.

To the extent that the PUC is concerned that it would not have
enforcement or taxation authority over the CRSTTA it was not necessary
to deny the transfer of exchange to the CRSTTA. The PUC could, as the
Department of Justice noted in its comments, "enter into an agreement
with a tribe concerning regulatory and taxation issues" for the purposes
of the transfers at issue without infringing the sovereignty of the
tribe.

I concur in the decision of the majority to the extent that the
*Memorandum Opinion and Order* finds the decision of the South Dakota
Supreme Court not to be preclusive. The *Order* correctly finds that the
South Dakota Supreme Court did not address the authority of the
Commission to preempt South Dakota law, and in fact found that issue to
be subject to the exclusive jurisdiction of the Commission.

To the extent that the decision of the majority finds that the South
Dakota PUC properly denied the transfer of the US West exchanges to the
CRSTTA, however, I must dissent.

[^1]: In July 2000, US WEST merged with, and became, Qwest
    Communications International, Inc. *See Qwest Communications
    International Inc. and U S West, Inc., Applications for Transfer of
    Control of Domestic and International Sections 214 and 310
    Authorizations and Applications to Transfer Control of a Submarine
    Cable Landing License*, CC Docket 99-272, Memorandum Opinion and
    Order, 15 FCC Rcd 11909 (2000).

[^2]: 47 U.S.C. §253. Section 253 was added to the Communications Act of
    1934 by the Telecommunications Act of 1996 (1996 Act), Pub. L. No.
    104-104, 110 Stat. 56, *codified at* 47 U.S.C. §§ 151 *et seq.* All
    citations herein to the 1996 Act will be to the 1996 Act as codified
    in Title 47 of the United States Code.

[^3]: S.D. CODIFIED LAWS §49-31-59.

[^4]: The Cheyenne River Sioux Tribe and U S West Communications, Inc.'s
    Joint Petition for Expedited Ruling Preempting South Dakota Law,
    filed January 22, 1998 (Joint Petition).

[^5]: Joint Petition at 2, 10-13.

[^6]: Joint Petition at 10-13.

[^7]: Joint Petition at 13-17.

[^8]: *Commission Seeks Comment on Cheyenne River Sioux Tribe Telephone
    Authority's and U S West's Joint Petition for Preemption Pursuant to
    Section 253,* Public Notice, CCB Pol 98-6, DA 98-145 (rel. Jan. 28,
    1998) (Public Notice). Five parties filed comments in response to
    the Public Notice. The South Dakota Commission filed comments
    opposing the Joint Petition. Three other parties, the Fort Mojave
    Indian Tribe and Fort Mojave Telecommunications, Inc. (collectively,
    Fort Mojave), the National Telephone Cooperative Association (NTCA),
    and the Standing Rock Sioux Tribe (SRST) also filed comments in
    support of the Joint Petition. Petitioners filed reply comments. On
    September 30, 1999, the Attorney General of the State of South
    Dakota submitted an *ex parte* letter. On January 19, 2000, the
    Environment and Natural Resources Division, Indian Resources Section
    of the United States Department of Justice and the United States
    Department of the Interior filed *ex parte* comments supporting the
    Joint Petition (DOJ *ex parte*). Petitioners filed several *ex
    parte* letters regarding their position.

[^9]: *Cheyenne River Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of
    S.D.*, 595 N.W.2d 604 (S.D. 1999).

[^10]: Joint Petition at 11, n. 3.

[^11]: The Telephone Authority is the parent company of Owl River
    Telephone, Inc. (Owl River), a state-chartered, tribally-owned
    entity of the Cheyenne River Sioux Tribe. Upon consummation of the
    transactions Owl River would operate the exchanges. Despite efforts
    to settle the issues raised in the Joint Petition, the Telephone
    Authority and the Attorney General of South Dakota were unable to
    agree upon the jurisdictional standing of, and the ability of the
    State of South Dakota to enforce judgments against, Owl River.
    Consequently, the Telephone Authority declared the efforts to settle
    the matter "finished" and asked the FCC "to consider the merits of
    the Joint Petition and decide whether § 253 . . . preempts South
    Dakota law prohibiting the Telephone Authority from purchasing three
    telephone exchanges from US WEST." *See* Letter from Alice Walker,
    Greene, Myer and McElroy, Counsel for Cheyenne River Sioux Tribe
    Telephone Authority, to Magalie Roman Salas, Secretary, Federal
    Communications Commission (July 19, 2000).

[^12]: The Standing Rock Sioux Tribe issued the Telephone Authority a
    tribal provisional certificate of convenience and necessity to
    operate that portion of the exchange located within the exterior
    boundaries of the Standing Rock Sioux Reservation. Within the
    exterior boundaries of both Reservations reside members of the
    Cheyenne River Sioux Tribe, members of the Standing Rock Sioux
    Tribe, non-member Indians, and non-Indians. In the City of Timber
    Lake, which is served by the Timber Lake Exchange, two-thirds of the
    population are non-Indians. Comments of the South Dakota Public
    Utilities Commission Opposing the Joint Petition of the Cheyenne
    River Sioux Tribe Telephone Authority and US West Communications,
    Inc. for an Expedited Ruling Preempting South Dakota Law, filed
    February 27, 1998 (SDC Comments), at 3-5.

[^13]: *See* Letter from Alice Walker, Greene, Myer and McElroy, Counsel
    for Cheyenne River Sioux Tribe Telephone Authority, to Magalie Roman
    Salas, Secretary, Federal Communications Commission (August 23,
    1999), at 1.

[^14]: *See* Letter from Alice E. Walker, Greene, Myer and McElroy,
    Counsel for Cheyenne River Sioux Tribe Telephone Authority, to
    Magalie Roman Salas, Secretary, Federal Communications Commission
    (August 23, 1999) at 2.

[^15]: S.D. CODIFIED LAWS § 49-31-59.

[^16]: *See*, *e.g.*, *Sale of Certain Telephone Exchanges by US WEST
    Communications, Inc. to Certain Telecommunications Cos. in South
    Dakota,* Decision and Order Regarding Sale of the Bowdle Exchange,
    TC 94-122, at 10 (S.D. PUC July 31, 1995).

[^17]: *Id*. An acquisition adjustment is the difference between the
    price paid for an exchange and its net book value. An extended area
    service arrangement increases the area within which subscribers may
    make calls without incurring toll charges.

[^18]: The proposed buyer for the fourth exchange was a municipality
    that sought to operate an exchange located outside its boundaries,
    an activity for which it lacked power under state law. *See*, *Sale
    of Certain Telephone Exchanges by US WEST Communications, Inc. to
    Certain Telecommunications Companies in South Dakota,* Decision and
    Order Regarding Sale of the Alcester Exchange, TC 94-122, at 10
    (S.D. PUC July 31, 1995).

[^19]: *Sale of Certain Telephone Exchanges by US WEST Communications,
    Inc. to Certain Telecommunications Companies in South Dakota*,
    Decision and Order Regarding Sale of the McIntosh Exchange,
    TC94-122, (S.D. PUC July 31, 1995)(*McIntosh I*); *Sale of Certain
    Telephone Exchanges by US WEST Communications, Inc. to Certain
    Telecommunications Companies in South Dakota*, Decision and Order
    Regarding Sale of the Timber Lake Exchange, TC94-122, (S.D. PUC July
    31, 1995)(*Timber Lake I*); *Sale of Certain Telephone Exchanges by
    US WEST Communications, Inc. to Certain Telecommunications Companies
    in South Dakota*, Decision and Order Regarding Sale of the
    Morristown Exchange, TC94-122, (S.D. PUC July 31, 1995)(*Morristown
    I*), *aff\'d in part and remanded in part sub nom.* *Cheyenne River
    Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of S.D.*, Civ. No.
    95-288 (S.D. Cir. Ct. Feb. 21, 1997) (*Cheyenne River I*), *on
    remand*, Amended Decision and Order Regarding Sale of the McIntosh
    Exchange (S.D. PUC Aug. 22, 1997) (*McIntosh II*), Amended Decision
    and Order Regarding Sale of the Timber Lake Exchange (S.D. PUC Aug.
    22, 1997) (*Timber Lake II*), Amended Decision and Order Regarding
    Sale of the Morristown Exchange (S.D. PUC Aug. 22, 1997)
    (*Morristown II*), *aff\'d sub nom, Cheyenne River Sioux Tribe Tel.
    Auth. v. Public Utils. Comm'n of S.D.*, Civ. No. 97-348 (S.D. Cir.
    Ct. Feb. 20, 1998)(*Cheyenne River II*), *aff\'d*, *Cheyenne River
    Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of S.D.*, 595 N.W.2d
    604 (S.D. 1999).

[^20]: The South Dakota Commission found that: (1) the Telephone
    Authority maintained that if the sale of the exchanges to the
    Telephone Authority were allowed, the Commission would lose all
    regulatory control over the exchanges; (2) the Telephone Authority
    refused to waive its sovereign immunity in order to provide the
    Commission with its statutorily mandated regulation of
    telecommunications services provided by a telecommunications company
    within the state of South Dakota; (3) the Telephone Authority
    refused to waive its sovereign immunity with regard to the gross
    receipts tax agreement and that the Telephone Authority had proposed
    to enter into negotiations with the state of South Dakota; (4) if
    the sale of the exchanges to the Telephone Authority were approved,
    the Telephone Authority would not recognize the Commission as having
    regulatory authority over the Telephone Authority and the exchanges;
    and (5) as the Telephone Authority declined to waive its sovereign
    immunity, the Commission similarly declines to give up its
    jurisdiction. The Commission also found that because the Telephone
    Authority maintains that there is no enforcement mechanism that
    would require the Telephone Authority to pay gross receipts taxes,
    approval of the sale would also result in the loss of significant
    tax revenue. *McIntosh I* at 5-6, Findings of Fact paras. 12, 16,
    17, 20, 22, 23; *Timber Lake I* at 5-6, Findings of Fact paras. 12,
    16, 17, 20, 22, 23; *Morristown I* at 5-6, Findings of Fact paras.
    12, 16, 17, 20, 22, 23.

[^21]: *McIntosh I* at 7, Conclusions of Law para. 3; *Timber Lake I* at
    7, Conclusions of Law para. 3; *Morristown I* at 7, Conclusions of
    Law para. 3.

[^22]: *McIntosh I* at 7, Conclusions of Law paras. 4, 5; *Timber Lake
    I* at 7, Conclusions of Law paras. 4, 5; *Morristown I* at 7,
    Conclusions of Law paras. 4, 5.

[^23]: *Cheyenne River I* (filed September 7, 1995). On October 24,
    1995, after filing the appeal of the *McIntosh I* decisions to South
    Dakota Circuit Court, the Telephone Authority and US WEST sued the
    South Dakota Commission and the individual South Dakota
    Commissioners in Federal District Court for the District of South
    Dakota, asserting a deprivation of civil rights under 42 U.S.C. §
    1983, and other claims similar to those then on appeal before the
    South Dakota Circuit Court. *Cheyenne River Sioux Tribe Tel. Auth.
    v. Public Utils. Comm'n of S.D.*, No. 95-3035 (D.S.D. filed October
    24, 1995). The parties agreed to dismiss the federal court
    proceedings because of the ongoing state circuit court proceedings
    addressing the same issues, other than the claim of a federal civil
    rights violation. On January 23, 1999, the Federal District Court
    dismissed the case without prejudice. *See* Letter from Alice
    Walker, Greene, Myer and McElroy, Counsel for Cheyenne River Sioux
    Tribe Telephone Authority, to Magalie Roman Salas, Secretary,
    Federal Communications Commission (August 20, 1999), at 2.

[^24]: *Cheyenne River I*, at 40-41. The court also found that South
    Dakota Commission's application of section 49-31-59 did not result
    in a denial of equal protection of the law nor did it
    unconstitutionally impair the contractual relationship between the
    Petitioners. *Id.* Further, the court found that the Commission's
    finding that the proposed sales would result in a significant tax
    loss to various governmental entities was not clearly erroneous,
    arbitrary, capricious or characterized by an abuse of discretion or
    a clearly unwarranted exercise of discretion. *Id.*

[^25]: *Id.*

[^26]: *Id.* at 30, n.17. Petitioners filed a joint notice of appeal of
    the Circuit Court's finding of no federal preemption of state law.
    Notice of Appeal, *Cheyenne River Sioux Tribe Tel. Auth., et al. v.
    Public Utils. Comm'n of S.D.*, No. 95-288, (S.D. Cir. Ct. May 9,
    1997). The parties subsequently stipulated to stay the appeal
    pending the remanded *McIntosh II* proceedings, which stipulation
    was approved by the South Dakota Supreme Court. *Cheyenne River
    Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of S.D.*, No. 20062
    (S.D. June 17, 1997).

[^27]: The Telephone Authority had asked that the record be reopened so
    that the South Dakota Commission could consider, among other
    matters, the Telephone Authority's "efforts to comply with \[the
    South Dakota Commission's\] regulatory requirements." *Sale of
    Certain Telephone Exchanges by US WEST Communications, Inc. to
    Certain Telecommunications Companies in South Dakota*, Decision and
    Order Regarding Sale of the McIntosh Exchange, TC94-122, (S.D. PUC
    July 31, 1995) *on remand*, Amended Decision and Order Regarding
    Sale of the McIntosh Exchange (S.D. PUC Aug. 22, 1997) (*McIntosh
    II*), *supra* note 21 at 4; *Sale of Certain Telephone Exchanges by
    US WEST Communications, Inc. to Certain Telecommunications Companies
    in South Dakota*, Amended Decision and Order Regarding Sale of the
    Timber Lake Exchange, TC94-122, (S.D. PUC Aug. 22, 1997) (*Timber
    Lake II*), *supra* note 21, at 4; *Sale of Certain Telephone
    Exchanges by US WEST Communications, Inc. to Certain
    Telecommunications Companies in South Dakota*, Amended Decision and
    Order Regarding Sale of the Morristown Exchange, TC94-122, (S.D. PUC
    Aug. 22, 1997) (*Morristown II*), *supra* note 21, at 4. The South
    Dakota Commission denied this request because the circuit court had
    remanded the case for consideration "on the record." *Id.*
    Ultimately, the South Dakota Supreme Court upheld the South Dakota
    Commission's action. *See* *infra* para. 17.

[^28]: *McIntosh II* at 8; *Timber Lake II* at 8; *Morristown II* at 8.

[^29]: *Cheyenne River Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of
    S.D.*, Order Affirming Findings of Fact and Conclusions of Law, Civ.
    No. 97-348 (S.D. Cir. Ct. Feb. 20, 1998).

[^30]: The Petitioners filed their section 253 preemption petition with
    the Commission on January 22, 1998.

[^31]: *Cheyenne River Sioux Tribe Tel. Auth., et al. v. Public Utils.
    Comm'n of S.D.*, No. 97-348 (S.D. Cir. Ct. Mar. 25, 1998) (Joint
    Notice of Appeal). The parties stipulated to consolidate this appeal
    with the stayed appeal of the Circuit Court's finding of no federal
    preemption. *Cheyenne River Sioux Tribe Tel. Auth., et al. v. Public
    Utils. Comm'n of S.D.*, Nos. 20062 and 20464, (S.D. Apr. 16, 1998)
    (Stipulation Consolidating Appeals for Purposes of Briefing and
    Submission).

[^32]: *Cheyenne River Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of
    S.D.*, 595 N.W.2d 604 (S.D. 1999)(*Cheyenne River v. South Dakota*).

[^33]: The Timber Lake exchange is distinguishable because
    "\[a\]pproximately one-half of the Timber Lake exchange is located
    within the boundaries of the Cheyenne River Sioux Indian
    Reservation. The remaining half of the exchange is located within
    the boundaries of the Standing Rock Sioux Indian Reservation."
    *Cheyenne River v. South Dakota* at 608, n.5. The Morristown and
    McIntosh exchanges are both completely within the boundaries of the
    Standing Rock Sioux Indian Reservation. *Id.* at 606, n.2.

[^34]: *Id.* at 609. *See* *Montana v. United States*, 450 U.S. 544
    (1981).

[^35]: *Cheyenne River v. South Dakota* at 609, *citing* 47 U.S.C. §
    152(b).

[^36]: *See, generally*, S.D. CODIFIED LAWS § 49-31.

[^37]: *Cheyenne River v. South Dakota* at 609 *citing* S.D. CODIFIED
    LAWS § 49-31-3.

[^38]: *Cheyenne River v. South Dakota* at 609-10.

[^39]: *Cheyenne River v. South Dakota* at 610.

[^40]: *Id.* at 610 *citing* *White Mountain Apache Tribe v. Bracker,*
    448 U.S. 136, 143 (1980)

[^41]: *Id.* at 610.

[^42]: *Id.* at 611.

[^43]: 476 U.S. 877 (1986).

[^44]: The Court noted that the Petitioners had conceded that the South
    Dakota Commission's "amended order regarding the sale of the Timber
    Lake exchange did not explicitly condition its disapproval of the
    sale on the Tribe's failure to waive its sovereign immunity."
    *Cheyenne River v. South Dakota* at 611, n.7.

[^45]: *Id.* at 612.

[^46]: The South Dakota Supreme Court analyzed the claims under
    applicable Constitutional standards to conclude that section
    49-31-59 passed rational basis scrutiny. *Id.* at 612-14.

[^47]: *Id.* at 614.

[^48]: *Id.* at 614-15.

[^49]: Letter from Lawrence E. Long, Chief Deputy Attorney General,
    Office of Attorney General, State of South Dakota, to Magalie Roman
    Salas, Secretary, Federal Communications Commission (September 30,
    1999) (South Dakota Attorney General *ex parte*) at 2.

[^50]: South Dakota Attorney General *ex parte* at 3-4.

[^51]: South Dakota Attorney General *ex parte* at 2-7. South Dakota
    states that the *Rooker-Feldman* doctrine stands for the
    propositions that a decision of a state court with regard to a
    federal question is conclusive unless overturned by the United
    States Supreme Court (*Rooker v. Fidelity Trust Co.,* 263 U.S. 413,
    415 (1923)), and that if constitutional claims presented to a United
    States District Court are inextricably intertwined with a state
    court decision, the District Court may not entertain the claim
    (*District Court of Appeals v. Feldman,* 460 U.S. 462, 482 n.16
    (1983)). South Dakota Attorney General *ex parte* at 4.

[^52]: South Dakota Attorney General *ex parte* at 5. South Dakota,
    citing *Matter of Estate of Nelson,* 330 N.W.2d 151 (S.D. 1983),
    argues that South Dakota law determines the scope of preclusion,
    including, but not limited to "issue preclusion." *Id.* In *Nelson*,
    the South Dakota Supreme Court determined that collateral estoppel
    serves as issue preclusion for all issues fully and fairly litigated
    in the first lawsuit." 330 N.W. 2d at 157.

[^53]: South Dakota Attorney General *ex parte* at 9-11.

[^54]: *See Town of Deerfield v. Federal Communications Comm'n*, 992
    F.2d 420 (2d Cir. 1993).

[^55]: *Cheyenne River II* at 57-58.

[^56]: The Petitioners also asked that record be reopened to reflect the
    establishment by the Telephone Authority of a new alternative
    dispute mechanism and the fact that the Standing Rock Sioux Tribe
    issued a provisional certificate of convenience and necessity to the
    Telephone Authority to operate exchanges on the Standing Rock Indian
    Reservation. The Circuit Court denied this request as well.
    *Cheyenne River II* at 58--59. The Petitioners appealed the denial
    of this request to the South Dakota Supreme Court which affirmed the
    Circuit Court. *Cheyenne River Sioux Tribe Tel. Auth. v. Public
    Utils. Comm'n of S.D.*, 595 N.W.2d 604, 614-15 (S.D. 1999). *See*
    *infra* para 17 .

[^57]: 47 U.S.C. § 253(a).

[^58]: 47 U.S.C. § 253(b).

[^59]: Joint Petition at 10.

[^60]: Joint Reply of the Cheyenne River Sioux Tribe Telephone Authority
    and US West Communications, Inc. to the Comments of the South Dakota
    Public Utilities Commission Opposing the Joint Petition for
    Preemption, CC Docket No. 98-6, March 16, 1998 (Joint Reply).

[^61]: South Dakota Attorney General *ex parte* at 1-2, 8-11.

[^62]: *Cheyenne River Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of
    S.D.*, 595 N.W.2d 604, 611-12 (S.D. 1999)(*Cheyenne River v. South
    Dakota*).

[^63]: *Id.* 614-15.

[^64]: Joint Petition at 8; *see also* NTCA Comments at 4; SRST Comments
    at 5; DOJ *ex parte* at 1-2, 5-6.

[^65]: SDC Comments at 8-13. The South Dakota Commission also asserts
    that the denial of the sales makes it more likely that competition
    will develop in the three exchanges, because if allowed to purchase
    the exchanges, the Telephone Authority would enjoy the benefits of
    the rural protection statute contained in section 251(f), which
    would further stifle competition. SDC Comments at 11-12, *citing* 47
    U.S.C. § 251(f). The South Dakota Commission contends section 251(f)
    "makes it more difficult for competitors to compete by giving rural
    telephone companies an automatic exemption from section 251(c)
    requirements and the right to ask for modifications or suspension of
    section 251(b) requirements."

[^66]: *See, e.g., City of Auburn v. Qwest Corp.*, 260 F.3d 1160 (9th
    Cir. 2001).

[^67]: *The Public Utility Commission of Texas; The Competition Policy
    Institute, IntelCom Group (USA), Inc. and ICG Telecom Group, Inc.,
    AT&T Corp., MCI Telecommunications Corporation, and MFS
    Communications Company, Inc.; Teleport Communications Group, Inc.;
    City of Abilene, Texas; Petitions for Declaratory Ruling and/or
    Preemption of Certain Provisions of the Texas Public Utility
    Regulatory Act of 1995,* CCB Pol 96-13, 96-14, 96-16, and 96-19;
    Memorandum Opinion and Order, 13 FCC Rcd 3460, para. 74 (1997).

[^68]: *See* 47 U.S.C. § 253(b).

[^69]: Joint Reply at 12-13, *citing* *Texas Preemption Order*, paras.
    83, 84; *see also* DOJ *ex parte* at 9, SRST Comments at 7-8.

[^70]: Joint Reply at 12, citing *Findings of Fact, Conclusions of Law,
    Order and Notice of Entry of Order*, Filing By Cheyenne River Sioux
    Tribe Telephone Authority for Designation as an Eligible
    Telecommunications Carrier, No. TC 97-184 (Dec. 17, 1997) (citations
    omitted).

[^71]: Joint Reply at 15.

[^72]: SDC Comments at 17-18. South Dakota also questions the relevance
    of the Telephone Authority's statement, in its August 20 *ex parte*
    letter, that the "Telephone Authority is a recipient of federal
    assistance from the United States Department of Agriculture's Rural
    Utilities Services, and is subject to the provisions of Title VI of
    the Civil Rights Act of 1964, as amended, section 504 of the
    Rehabilitation Act of 1973, as amended, and the Age Discrimination
    Act of 1975, as amended, as well as the rules and regulations of the
    United States Department of Agriculture . . . ." South Dakota
    Attorney General *ex parte* at 16-17.

[^73]: SDC Comments at 14 n. 6.

[^74]: South Dakota Attorney General *ex parte* at 9, *citing Cheyenne
    River Sioux Tribe Tel. Auth. v. Public Utils. Comm'n of S.D.*, 595
    N.W.2d 604, 612 (S.D. 1999)(*Cheyenne River v. South Dakota*).

[^75]: *See, New England Public Communications Council Petition for
    Preemption Pursuant to Section 253*, CCB Pol 96-11, *Memorandum
    Opinion and Order*, 11 FCC Rcd 19713, 19725 (1996) (*New England
    Preemption Order*) at para. 25, *recon. denied, Memorandum Opinion
    and Order*, CCB Pol 96-11, 12 FCC Rcd 5215 (1997). In that
    proceeding, the Commission preempted a Connecticut Department of
    Public Utility Control decision that prohibited competitive entry by
    a class of payphone providers, finding that the state had not
    demonstrated methods short of prohibition, the most restrictive
    means available, to achieve its purpose of protecting consumers.
    *See* *New England Preemption Order* at para. 22.

[^76]: For instance, the South Dakota Commission determined that,
    because it would lack regulatory jurisdiction over the exchanges, it
    would be unable to require, as conditions for sale, that the
    Telephone Authority: (a) continue to offer all existing US WEST
    services; (b) honor all US WEST contracts and agreements; (c) not
    increase local rates for 18 months; and (d) obtain South Dakota
    Commission approval before changing any existing extended area
    service arrangements. The South Dakota Commission also determined
    that it would be unable to require the Telephone Authority to pay
    gross receipts taxes, to make any improvements necessary for public
    safety and convenience, or to provide regulatory protection to the
    majority of the Telephone Authority's subscribers. *See Cheyenne
    River v. South Dakota* at 612.

[^77]: *See Cheyenne River v. South Dakota* at 612.

[^78]: *See* S. CONF. REP. No. 230, 104^th^ Cong., 2d Sess. 1, at 126.
    (Congress envisioned that in the ordinary case, States and
    localities would enforce the public interest goals delineated in
    section 253(b) through means other than absolute prohibitions on
    entry, such as clearly defined service quality requirements or
    legitimate enforcement actions).

[^79]: *Cheyenne River v. South Dakota* at 611 (citing findings of the
    South Dakota Commission). We note that the parties also attempted to
    settle the issues raised by the Joint Petition. *See* Letter from
    Alice Walker, Greene, Myer and McElroy, Counsel for Cheyenne River
    Sioux Tribe Telephone Authority, to Magalie Roman Salas, Secretary,
    Federal Communications Commission (August 20, 1999); Letter from
    Alice Walker, Greene, Myer and McElroy, Counsel for Cheyenne River
    Sioux Tribe Telephone Authority, to Magalie Roman Salas, Secretary,
    Federal Communications Commission (July 19, 2000).

[^80]: *See City of Abilene, Texas v. Federal Communications Comm'n*,
    164 F.3d 49 (D.C. Cir. 1999) (*Abilene*). In *Abilene,* the
    municipality argued that sections 253(b) and (c) are evidence of
    Congressional intent to reserve to the states only very narrow
    powers. The District of Columbia Circuit reached the opposite
    conclusion:

    > Abilene points out that § 253 contains two other subsections
    > explicitly restricting the scope of preemption and preserving
    > State regulatory authority over telecommunications services. See
    > 47 U.S.C. § 253 (b), (c). From this it draws the conclusion that
    > Congress meant to reserve to the States only very narrow powers.
    > We think the opposite conclusion follows. The two subsections\--§
    > 253(b) and (c)---set aside a large regulatory territory for State
    > authority. States may act to preserve and advance universal,
    > protect the public safety and welfare, ensure the continued
    > quality of telecommunications services, safeguard the rights of
    > consumers, manage the public rights-of-way, and require fair and
    > reasonable compensation from telecommunications providers for use
    > of public rights-of-way. 164 F.3rd at 53.

[^81]: *See* Letter from Alice Walker, Greene, Myer and McElroy, Counsel
    for Cheyenne River Sioux Tribe Telephone Authority, to Magalie Roman
    Salas, Secretary, Federal Communications Commission (August 23,
    1999); Letter from James A. Casey, Greenberg Traurig, Counsel for
    Cheyenne River Sioux Tribe Telephone Authority, to Magalie Roman
    Salas, Secretary, Federal Communications Commission (March 8, 2000);
    Letter from Alice Walker, Greene, Myer and McElroy, Counsel for
    Cheyenne River Sioux Tribe Telephone Authority, to Magalie Roman
    Salas, Secretary, Federal Communications Commission (July 19, 2000).

[^82]: *See AVR, L.P. d/b/a Hyperion of Tennessee, L.P. Petition for
    Preemption of Tennessee Code Annotated § 65-4-201(d) and Tennessee
    Regulatory Authority Decision Denying Hyperion's Application
    Requesting Authority to Provide Service in Tennessee Rural LEC
    Service Areas*, CCB Pol 98-92, *Memorandum Opinion and Order*, 14
    FCC Rcd 11064, 11072, para. 16 (1999).

[^83]: *Cheyenne River v. South Dakota* at 614; *infra* para. 18
    (discussion of conditions).

[^84]: *Texas Preemption Order* at paras. 106-107. (A limitation in the
    Texas regulatory scheme restricting only certain Certificate of
    Authority holders from providing service in rural areas violates
    section 253.)

[^85]: South Dakota contends that the Commission cannot mandate the sale
    of the exchanges to the Telephone Authority because to do so would
    deprive the State of South Dakota of duties mandated to it and
    functions allowed to it under section 254. South Dakota Attorney
    General *ex parte* at 14-15.

[^86]: Joint Petition at 13-17.

[^87]: Joint Petition at 13-17, Appendix B at B-4 to B-9.

[^88]: *Cheyenne River v. South Dakota*, 595 N.W.2d 610-11.

[^89]: Ex Parte Comments of the United States Department of Justice and
    the United States Department of the Interior at 3 (filed Jan. 19,
    2000).

[^90]: *Cheyenne River Sioux Tribe Telephone Authority v. Pub. Utils.
    Comm'n of South Dakota*, 595 N.W.2d 604, 609-11 (S.D. 1999).

[^91]: *See, e.g.*, *Town of Deerfield v. FCC*, 992 F.2d 420 (2d Cir.
    1993) (applying doctrine of issue preclusion).

[^92]: The *Texas Preemption Order*, for example, held that section
    253(a) bars state commissions from relegating putative entrants to
    particular modes of entry, which suggests that denying permission to
    purchase an exchange constitutes a "prohibition" under section
    253(a)*. See The Public Utility Comm'n of Texas; The Competition
    Policy Institute, IntelCom Group (USA), Inc. and ICG Telecom Group,
    Inc., AT&T Corp., MCI Telecommunications Corp., and MFS
    Communications Co., Inc.; Teleport Communications Group, Inc.; City
    of Abilene, Texas; Petitions for Declaratory Ruling and/or
    Preemption of Certain Provisions of the Texas Public Utility
    Regulatory Act of 1995*, CCB Pol. 96-13, 96-14, 96-16, and 96-19,
    Memorandum Opinion and Order, 13 FCC Rcd 3460 para. 74 (1997).

[^93]: *Cheyenne River*, 595 N.W.2d at 612.

[^94]: *Id.*

[^95]: *Id.* at 609.

[^96]: *See Three Affiliated Tribes of Fort Berthold Reservation v. Wold
    Engineering*, 476 U.S. 877 (1986).

[^97]: In The Matter Of The Public Utility Commission Of Texas, City Of
    Abilene, Texas

    \(1997\) 13 F.C.C.R. 3460. (*citation omitted)*