Opinion ID: 3064756
Heading Depth: 3
Heading Rank: 2

Heading: State Law Authority

Text: While Arizona law grants the ACC broad powers to make unbundling and pricing determinations, federal preemption restricts that power here. We conclude that, due to conflict preemption, state law cannot empower state commissions to prescribe or fix rates for Section 271 terms or institute unbundling requirements previously abolished by the FCC. See AT&T Corp., 525 U.S. at 378 n.6 (“[I]f the federal courts believe a state commission is not regulating in accordance with federal policy they may bring it to heel.”). [7] Even though the Act does not contain an express preemption command, “a federal statute implicitly overrides state law . . . when state law is in actual conflict with federal law.” Freightliner Corp. v. Myrick, 514 U.S. 280, 287 (1995). This so-called conflict preemption is found “where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Id. (internal quotation marks omitted). In deciding whether the ACC’s order “ ‘stands as an obstacle’ to the full implementation of the [Act], it is not enough to say that the ultimate goal of both federal and state law is [the same].” See Int’l Paper Co. v. Ouellette, 479 U.S. 481, 494 (1987). Rather, “[a] state law QWEST v. ARIZONA CORPORATION COMMISSION 6795 also is pre-empted if it interferes with the methods by which the federal statute was designed to reach this goal.” Id. “[B]ecause of the long history of federal presence in regulating long-distance telecommunications[,]” the ordinary presumption against finding preemption does not apply. Ting v. AT&T, 319 F.3d 1126, 1136 (9th Cir. 2003). [8] The imposition of Section 271 requirements by the ACC under state law is preempted as it “interferes with Congress’ chosen method in effectuating the purposes of the [Act].” See Ting, 319 F.3d at 1146; accord Pacific Bell, 325 F.3d at 1126 (“It is clear from the structure of the Act . . . that the authority granted to state regulatory commissions is confined to the role described in § 252 — that of arbitrating, approving, and enforcing interconnection agreements.”). Congress “unquestionably” took “regulation of local telecommunications competition away from the States . . . [w]ith regard to the matters addressed by the 1996 Act[.]” AT&T Corp., 525 U.S. at 378 n.6. The Act restricts the ACC to serving a limited consultation role while granting the FCC exclusive power to determine and enforce Section 271 compliance. 47 U.S.C. § 271(d); see also BellSouth Telecomms., Inc. v. Georgia Public Serv. Comm’n, 587 F. Supp. 2d 1258, 1264 (N.D. Ga. 2008), aff’d, ___ F.3d ___, 2009 WL 368527 (11th Cir. Jan. 26, 2009) (“[Although] Congress reserved some state authority to impose unbundling requirements that parallel the obligations of § 251, see 47 U.S.C. § 251(d)(3), that provision is expressly limited to implementation of § 251, and § 271 contains no similar savings clause, strongly signaling Congress’s expectation that state commissions would not exercise independent state-law authority with respect to § 271 checklist items.”); MCI Telecomm. Corp. v. Bell Atlantic-Pennsylvania, 271 F.3d 491, 510 (3d Cir. 2001) (“Regulating local telecommunications competition under the 1996 Act . . . is an activity in which states and state commissions are not entitled to engage except by the express leave of Congress.”). [9] We agree with the First, Seventh, and Eleventh Circuits that the Act preempts state commissions from imposing TEL6796 QWEST v. ARIZONA CORPORATION COMMISSION RIC rates for Section 271 elements. See Verizon New England, 509 F.3d at 9 (deciding preemption principles force such state orders to give way since “[t]o allow the states to require the lower TELRIC rates directly conflicts with, and undercuts, the FCC’s orders”); Illinois Bell Tel. Co., 548 F.3d at 612-13 (finding “a real conflict between the federal and state regulatory schemes” when the state commission required the BOC to charge rates no higher than cost for Section 271 unbundled services); BellSouth Telecomms., 587 F. Supp. 2d at 1264, aff’d, ___ F.3d ___, 2009 WL 368527 (11th Cir. Jan. 26, 2009) (holding the state commission’s decision forcing a BOC to charge regulated rates for Section 271 “checklist items cannot be reconciled with the FCC’s statements”); see also supra note 6 and accompanying text (discussing TELRIC below-market pricing). [10] The FCC has determined that the market rate, rather than “the section 252(d)(1) pricing standard” (i.e., TELRIC pricing), applies to Section 271 elements. TRO ¶¶ 656-64, 18 F.C.C.R. 16978, 17386-89; UNE Remand Order ¶ 473, 15 F.C.C.R. 3696, 3906 (1999) (“In circumstances where a checklist network element is no longer unbundled [under Section 251(c)(3)] . . . it would be counterproductive to mandate that the incumbent offers the element at forward-looking prices. Rather, the market price should prevail, as opposed to a regulated rate . . . .”); see also Illinois Bell Tel. Co., 548 F.3d at 612 (proclaiming “the FCC allows the market rate to be charged” under Section 271); Nuvox Commc’ns, Inc. v. BellSouth Comm’ns, Inc., 530 F.3d 1330, 1335 (11th Cir. 2008) (per curiam) (“[I]LECs are permitted to charge market rates for section-271 elements . . . .”). Moreover, the FCC has explained that “[w]hether a particular [Section 271] checklist element’s rate satisfies the just and reasonable pricing standard of section 201 and 202 is a fact-specific inquiry that the [FCC] will undertake in the context of a BOC’s application for section 271 authority or in an enforcement proceeding brought pursuant to section 271(d)(6).” TRO ¶ 664, 18 F.C.C.R. 16978, 17389 (emphasis added). QWEST v. ARIZONA CORPORATION COMMISSION 6797 [11] We further hold that the ACC’s claim of “jurisdiction to impose unbundling requirements under Arizona law that the TRO or USTA II decisions struck down” is also subject to conflict preemption. In accordance with the decisions of the First and Seventh Circuits, we conclude that the ACC’s order stands “in direct conflict with specific FCC policies adopted pursuant to its authority under the 1996 Act.” Verizon New England, 509 F.3d at 9 (“The problem for the states is the FCC’s delisting was intended to free the carriers from such compulsion.”); Illinois Bell Tel. Co., 548 F.3d at 611 (opining that state commissions cannot “in effect . . . overrule the FCC’s decision not to require additional unbundling at the [ILEC’s] cost”); see also id. (“The FCC has been charged by Congress with determining the optimal amount of unbundling — enough to enable [CLECs] to compete with [ILECs] but not so much as to enable them to take an almost free ride on services that [ILECs] ha[ve] spent a lot of money to create. That judgment . . . is without force if a state can require more unbundling at cost than the FCC requires.”); TRO ¶ 658, 18 F.C.C.R. 16978, 17387 (2003) (“We . . . decline to use section 271 . . . to broaden the unbundling obligations of section 251.”). The ACC points to Section 251(d)(3)’s savings clause, which states the FCC cannot “preclude the enforcement of any regulation, order, or policy of a State commission that — (A) establishes access and interconnection obligations of local exchange carriers; (B) is consistent with the requirements of this section; and (C) does not substantially prevent implementation of the requirements of this section and the purposes of this part.” Holding that preemption bars the ACC from imposing FCC-revoked requirements comports with this savings clause as “the access requirements imposed by the [ACC] are inconsistent with the requirements of section 251 and do prevent their implementation.” See Illinois Bell Tel. Co., 548 F.3d at 611; see also 47 U.S.C. § 251(d)(2) (directing the FCC to determine which network elements must be unbundled); Geier v. Am. Honda Motor Co., 529 U.S. 861, 870 6798 QWEST v. ARIZONA CORPORATION COMMISSION (2000) (“[The Supreme] Court has repeatedly declined to give broad effect to saving clauses where doing so would upset the careful regulatory scheme established by federal law.” (internal quotation marks and alterations omitted)); Verizon New England, 509 F.3d at 9 (“For a state to require such sharing where the FCC thinks compulsion is detrimental is no different than insistence on TELRIC pricing in contravention of the FCC’s mandate for a different pricing scheme.”).