Opinion ID: 169308
Heading Depth: 2
Heading Rank: 2

Heading: State Authorities and Interstate Communications5

Text: 11 The concept of a clean divide between interstate and intrastate jurisdiction in the world of telecommunications regulation has long been considered anachronistic, even before the advent of mobile telecommunications. As the Supreme Court has observed, 12 while the [Communications] Act would seem to divide the world of domestic telephone service neatly into two hemispheres-one comprised of interstate service, over which the FCC would have plenary authority, and the other made up of intrastate service, over which the States would retain exclusive jurisdiction-in practice, the realities of technology and economics belie such a clean parceling of responsibility. This is so because virtually all telephone plant that is used to provide intrastate service is also used to provide interstate service, and is thus conceivably within the jurisdiction of both state and federal authorities. Moreover, because the same carriers provide both interstate and intrastate service, actions taken by federal and state regulators within their respective domains necessarily affect the general financial health of those carriers, and hence their ability to provide service, in the other hemisphere. 13 La. Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 360, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986). In Louisiana Public Service Commission, the Court rejected the suggestion that the FCC's jurisdiction preempted state action whenever the state action impacted assets used for both interstate and intrastate communication. Id. at 374-75, 106 S.Ct. 1890. 14 The revisions to the Telecommunications Act enacted in 1993 and 1996 continued to reflect this uneasy jurisdictional allocation between states and the federal government. The Act provides that the FCC has no jurisdiction over intrastate communication services, generally leaving the regulation of such services to the states. 47 U.S.C. § 152(b). However, Congress, by extending the Communications Act into local competition, has removed a significant area from the States' exclusive control. AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 381 n. 8, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). The Supreme Court views the 1996 Act as reserving to states their authority to regulate intrastate communications [i]nsofar as Congress has remained silent about the regulatory matter at issue. Id. The Court noted that the FCC could not, for example, regulate any aspect of intrastate communication not governed by the 1996 Act on the theory that it had an ancillary effect on matters within the [FCC's] primary jurisdiction. Id. See also Philip J. Weiser, Chevron, Cooperative Federalism, and Telecommunications Reform, 52 Vand. L.Rev. 1, 25 (1999) (describing how Congress envisioned that the state agencies would have an independent role in implementing a number of the Act's provisions). Therefore, in discerning the limits of a state's regulatory authority, we look past a mere rule of thumb demarcating jurisdiction over interstate or intrastate communications, and instead look to the Telecommunications Act itself. 15 Under the Act, the FCC is charged with certain regulatory authority over mobile services, even to the extent they have intrastate components. 47 U.S.C. §§ 152(b), 332. The FCC has exclusive jurisdiction to regulate the rates and conditions of market entry of mobile services. 47 U.S.C. § 332(c)(3)(A). However, states are expressly permitted to regulate the other terms and conditions of commercial mobile services. Id. 16 Likewise, the Telecommunications Act preempts a particularly onerous state regulation by providing that [n]o State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. 47 U.S.C. § 253(a). However, Congress also stated that [n]othing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254 of this title, 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. 47 U.S.C. § 253(b). 17 It is clear that states have authority under the Telecommunications Act to adopt their own universal service standards and create funding mechanisms sufficient to support those standards, as long as the standards are not inconsistent with the FCC's rules, and as long as the state program does not burden the federal program. 47 U.S.C. § 254(f). Moreover, states are given the primary responsibility for deciding which carriers qualify as ETCs to be eligible for subsidies from the federal universal service fund. As noted earlier, when a rural telephone company already serves a given area and another carrier seeks ETC designation for the same area, the state must decide whether that designation would be in the public interest. 47 U.S.C. § 214(e)(2). 18 The district court held that because Western Wireless bundled its intrastate and interstate services, the PUC's conditions of ETC designation amounted to interstate regulation that was preempted by the Telecommunications Act. 6 However, nothing in the Act expressly preempts a state from exercising the above authority to regulate carriers providing intrastate services or to designate such carriers as ETCs simply on the basis that the requirements or ETC designation conditions being imposed would affect some phone calls that originate and terminate in different states. Nor does the Act limit a state's jurisdiction over a telecommunications carrier merely because the carrier offers interstate and intrastate services in bundles to individual consumers. 19 For example, Congress was well aware that mobile services, by their nature, operate without regard to state lines as an integral part of the national telecommunications infrastructure, and therefore created Section 332(c)(3)(A) to preempt state rate and entry regulation of all commercial mobile services. H. Rpt. No. 103-111, at 260 (1993), reprinted in 1993 U.S.C.C.A.N. 378, 587 (emphasis added). Yet, at the same time, Congress decided to permit a state to regulate the other terms and conditions of a mobile service provider, with no explicit limitation on whether a state's regulations affect the provision of interstate service. These provisions do not suggest that a carrier may declare itself exempt from all relevant regulations of a state universal service program simply because the carrier's rate structure does not distinguish between interstate and intrastate calls. Instead, a carrier would need to demonstrate that a state's requirements effectively regulate rates or are so onerous as to constitute a barrier to entry. 20 In summary, the jurisdictional delineation between state and federal authority focuses on the types of requirements being imposed, not whether the regulated entity offers bundled interstate services with its intrastate services. For mobile telecommunications services, Section 332(c)(3)(A) draws the line between regulation of rates or market entry, which is the FCC's exclusive purview, and other terms and conditions, which are permissive regulatory subjects for states. Even though Congress was sensitive to the need to foster the growth and development of mobile services, Congress envisioned that state commissions could regulate mobile services for such matters as customer billing information and practices and billing disputes and other consumer protection matters; facilities siting issues (e.g., zoning); transfers of control; the bundling of services and equipment; and the requirement that carriers make capacity available on a wholesale basis or such other matters as fall within a state's lawful authority. This list is intended to be illustrative only and not meant to preclude other matters generally understood to fall under `terms and conditions.' Id. at 588. 7 Therefore, in assigning the responsibility for regulating mobile service providers, the what matters as much as the where. 21 For regulation aimed at promoting universal service, Section 254(f) provides a hierarchy in which states cannot conflict with the federal universal services program, but states are clearly authorized to build upon the federal program to support universal service. See Qwest Corp. v. FCC, 258 F.3d 1191, 1203 (10th Cir.2001) (The Telecommunications Act plainly contemplates a partnership between the federal and state governments to support universal service.... Thus, it is appropriate — even necessary — for the FCC to rely on state action in this area.). 22 At the same time, the FCC has decided that state commissions have the primary responsibility for performing ETC designations that result in telecommunications providers being eligible for federal universal service subsidies. In re Fed.-State Joint Bd. on Universal Serv., 20 F.C.C. Rcd. 6371, 6374 (Mar. 17, 2005) ( 2005 Universal Service Order ). The FCC has established standards for ETC designations made by the FCC. Id. at 6372. Although the FCC has encouraged state commissions to adopt these same requirements, it has declined to require states to do so. Id. Instead, the FCC generally affirmed that states have the discretion to impose additional eligibility requirements on carriers seeking ETC designations, without reference to whether the requirements can or cannot be applied to a carrier's interstate components. 23 We believe that section 214(e)(2) demonstrates Congress's intent that state commissions evaluate local factual situations in ETC cases and exercise discretion in reaching their conclusions regarding the public interest, convenience and necessity, as long as such determinations are consistent with federal and other state law.... Consistent with our adoption of permissive federal guidelines for ETC designation, state commissions will continue to maintain the flexibility to impose additional eligibility requirements in state ETC proceedings, if they so choose. 24 Id. at 6397-98. 25 The states' authority to make ETC designations extends to wireless carriers seeking federal universal service subsidies. The FCC specifically rejected suggestions that consumer protection requirements imposed on wireless carriers as a condition for ETC designation are necessarily inconsistent with section 332 of the Act. Id. at 6384-85. Instead, the FCC decided that states may extend generally applicable, competitively neutral requirements [to wireless carriers] that do not regulate rates or entry and that are consistent with sections 214 and 254 of the Act to all ETCs in order to preserve and advance universal service. Id. at 6384-85. Of relevance here, the FCC has not said that a state must parse out the application of these requirements to avoid affecting the interstate services of carriers providing bundled services. The FCC's interpretation of the Telecommunications Act's provisions addressing state ETC designations is, of course, subject to deference. See Qwest Commc'ns Int'l, Inc. v. FCC, 398 F.3d 1222, 1229-30 (10th Cir. 2005) (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)). 26 At least one circuit court has agreed with the FCC in this regard, and we have found no circuit authority to the contrary. The Fifth Circuit, in Texas Office of Public Utility Counsel v. FCC, 183 F.3d 393 (5th Cir.1999), expressly held that the Telecommunications Act permits states to impose some additional eligibility requirements on carriers seeking an ETC designation. See id. at 418 (discussing Section 214(e)(2) and concluding that nothing in the statute . . . prohibits states from imposing their own eligibility requirements). And we must assume that the FCC's order permitting state commissions to impose consumer protection requirements on ETC designees is valid under the Telecommunications Act. 8 27 Western Wireless attempts to rely on the FCC's orders regarding internet voice services to support its argument that states have no jurisdiction over any type of communications that bundles interstate and intrastate services. In 2004, the FCC issued an order preempting a state's attempt to regulate voice over internet protocol (VoIP) services. In re Vonage Holdings Corp. Petition for Declaratory Ruling Concerning an Order of the Minn. Pub. Utils. Comm'n, 19 F.C.C. Rcd. 22,404 (Nov. 12, 2004) ( Vonage Order ). The Eighth Circuit affirmed the FCC's order. Minn. Pub. Utils. Comm'n v. FCC, 483 F.3d 570 (8th Cir.2007). 28 VoIP services are provided through the internet but resemble telephone communications and interact with both traditional wireline services and mobile services. The locations of both the call origination and termination are irrelevant to such services. A subscriber need only be somewhere with broadband internet access. The Minnesota Public Utilities Commission had issued an order subjecting Vonage to the same requirements imposed on other telephone companies in the state, such as the requirement to offer 911 emergency services comparable to other wireline carriers. Vonage Order, 19 F.C.C. Rcd. at 22,408. 29 The FCC found that Vonage's services were jurisdictionally mixed and therefore theoretically subject to dual federal/state jurisdiction, but concluded that the FCC preempted state regulation over internet services when, as with VoIP services, it was impossible or impractical to separate the services into intrastate and interstate components. Id. at 22,413. The Eighth Circuit subsequently held that [t]he impossibility exception, if applicable, is dispositive of the issue whether the FCC has authority to preempt state regulation of VoIP services. Minn. Pub. Utils. Comm'n, 483 F.3d at 578. Western Wireless likens VoIP services to mobile communications, which also bundle their interstate and intrastate services and have no technical limitations inherent to state boundaries, in arguing that the PUC's ETC conditions are preempted by the FCC's jurisdiction. 30 The FCC's ruling in Vonage is simply not applicable to the issues in this case, particularly in light of the 2005 Universal Service Order. First, the FCC found that VoIP services are internet services, and that Congress specifically intended internet services to be treated differently than either mobile communications or traditional wireline services. The Telecommunications Act does not provide a mixed state-federal regulatory scheme for internet services, with the exception of provisions for blocking offensive material. 47 U.S.C. § 230. In contrast, the Act establishes a detailed regulatory scheme for commercial mobile services, with primary jurisdiction given to the FCC, but expressly permits states to regulate non-rate and non-entry aspects of mobile services and requires states designating ETCs in rural markets served by an incumbent provider to make a public interest determination. 47 U.S.C. § 332(c)(3)(A). 31 Second, the FCC's Vonage order reacted to a state decision that required Vonage to comply with all state statutes and regulations relating to the offering of telephone service, i.e. market entry requirements. Vonage Order, 19 F.C.C. Rcd. at 22,409, 22,430. In our case, the PUC has not extended the gamut of telephone regulations to mobile services. Instead, Western Wireless approached the PUC to receive federal universal service subsidies, and the PUC determined that public interest required that an ETC designation for receipt of those subsidies be conditioned on compliance with certain requirements that have also been imposed on wireline companies seeking the same type of subsidies. As such, Western Wireless actually requested the PUC's jurisdiction to the extent of receiving ETC designation. And Western Wireless cannot claim that it is being subjected to the full panoply of wireline regulations, as not only are the ETC conditions at issue merely a subset of those regulations, but also Western Wireless retains the ability to opt out of them entirely by declining any federal universal service subsidies. 32 Third, the FCC's Vonage order was based in part on a finding that the state's decision directly conflicts with the FCC's approach for regulating VoIP services. Id. at 22,415. Yet here, there is no direct conflict between the PUC's conditions of ETC designation and the FCC's regulatory approach. Instead, a year after the Vonage decision, the FCC affirmed that state commissions could impose consumer protection requirements on wireless carriers seeking ETC designation. 2005 Universal Service Order, 20 F.C.C. Rcd. at 6384-85. And while the PUC's conditions might not be exactly what the FCC would impose if it were the entity designating Western Wireless as an ETC, see supra note 3, the FCC has interpreted the Telecommunications Act as permitting states to establish their own additional requirements. 33 Last, the FCC in Vonage decided that the state's regulatory reach violated the U.S. Constitution's Commerce Clause, since Minnesota's requirements would have the `practical effect' of regulating commerce occurring wholly outside that state's borders. Vonage Order, 19 F.C.C. Rcd. at 22,428 (quoting Healy v. Beer Inst., 491 U.S. 324, 332, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989)). However, Congress has the power to make exceptions to the Commerce Clause's restrictions on state jurisdiction and to permit states to regulate in a way that affects interstate commerce. See New York v. United States, 505 U.S. 144, 171, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992) (While the Commerce Clause has long been understood to limit the States' ability to discriminate against interstate commerce, that limit may be lifted . . . by an expression of the `unambiguous intent' of Congress. (citations omitted)). With respect to mobile communications Congress has done just that, preempting states from regulating the rates and market entry conditions of mobile carriers, but expressly allowing the states to regulate the other terms and conditions. 47 U.S.C. § 332(c)(3)(A). We must respect Congress's decision in this matter to allow state PUCs to exercise ETC designation authority, which has not been limited by Congress to instances where only intrastate commerce is affected. 34 In summary, the Telecommunications Act does not categorically bar the PUC from exercising jurisdiction over services that may include an interstate component when the PUC acts within its explicit authorities under the Act. 9 Moreover, the FCC, in affirming states' authorities under Sections 214 and 254, has not attempted to restrict the sweep of those authorities exclusively to intrastate services. The Act explicitly grants the FCC the authority to preempt a state regulation that has the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. 47 U.S.C. § 253(a), (d). However, the FCC has yet to exercise that statutory authority to preempt the type of ETC conditions at issue in this case. 35 Western Wireless's argument in this regard points to the potential tension between state and federal jurisdiction that permeates the Telecommunications Act, and the absence of clear federal guidance on the extent to which a state's conditions of ETC designation imposed on a wireless provider can embrace the type of regulation traditionally established for wireline carriers without impermissibly burdening the federal universal services program. Untangling those issues is simply beyond the scope of our current review. Our decision is aimed solely at the question presented: whether the Telecommunications Act permits a state to impose ETC conditions not related to regulation of rates or market entry that affect the interstate components of a mobile carrier that bundles its interstate and intrastate services. 36 Today we do not pass on the questions of whether the nature and extent of the conditions at issue here are beyond the bounds of a state's Section 214(e) authority, or whether they impermissibly burden the federal universal service program under Section 254(f). We remand to the district court for further consideration of unresolved issues that may include those questions. However, we do hold, contrary to the ruling of the district court, that federal law does not automatically preclude the PUC from exercising those authorities in a way that affects the interstate component of an ETC designee's services. 37