Court Opinion

ID: 8922682
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:24:14.225504+00
Date Added: 2024-06-11T17:09:19.294989
License: Public Domain

WIDENER, Circuit Judge,
dissenting:
I respectfully dissent.
I am unable to agree that the FCC orders prescribing depreciation practices for common carriers’ interstate operations require or warrant preemption of state regulation prescribing different depreciation methods *397for carriers’ intrastate operations. Such preemption conflicts with the FCC’s jurisdictional limitations and with this court’s' reading of the Supremacy Clause in North Carolina Utilities Commission v. FCC (NCUC I), 537 F.2d 787 (4th Cir.), cert. denied, 429 U.S. 1027, 97 S.Ct. 651, 50 L.Ed.2d 631 (1976), and North Carolina Utilities Commission v. FCC (NCUC II), 552 F.2d 1036, cert. denied, 434 U.S. 874, 98 S.Ct. 222, 54 L.Ed.2d 154 (1977). The FCC properly recognized these limitations in its order of April 27, 1982, in which it specifically found that its prescription of new accounting procedures “does not preclude state commissions from using other accounting or depreciation procedures for intrastate ratemaking proceedings.” In re Amendment of Part 31, 89 F.C.C.2d 1094, 1095 (1982), rev’d, CC Docket No. 79-105 (F.C.C. Jan. 6, 1983). Its order of January 6, 1983, finding that the States were preempted after all, not only violates statutory strictures on the FCC but also legal limitations on any agency making such a dramatic change in policy.
The Communications Act explicitly deprives the FCC of jurisdiction to regulate directly “charges, classifications, practices” and “facilities,” among other things, for or in connection with intrastate communication service. 47 U.S.C. §§ 152(b), 221(b). Unlike other areas of the law in which the term “intrastate” has come to include virtually nothing, communication carrier accounting has until now retained a clear division between its intrastate and interstate components, and this because of the Communications Act itself. Equipment and facilities used for intrastate communications are segregated on the carriers’ books from those used for interstate communications, and the States and the FCC have regulated accounting for such equipment and facilities concurrently within their respective intrastate and interstate spheres. About 75% of depreciable assets are considered intrastate. The section of the Communications Act giving the FCC authority to prescribe depreciation practices for carriers, 47 U.S.C. § 220(b), therefore cannot be read to “require preemption” of state-imposed depreciation practices for the intrastate portion of carriers’ operations. More directly put, the FCC does not have jurisdiction to prescribe directly the depreciation practices to be followed as to equipment and facilities alloeated to intrastate communications.1
The Proper analysis of th,s case’ then’18 whether the state regulation of depreciation Practices as to carriers’ intrastate operations conflicts with the FCC regulation such practices for carriers interstate operations to a degree that it requires preeruption of the state regulation under the Supremacy Clause of the Constitution. This court set forth the rule in NCUC II that FCC regulation of facilities and equipment must preempt contrary state regulation where the efficiency or safety of the national communications network or “other important interests of national communications Policy” are at stake NCUC U’ 552 F'2c* at 47 4 NCUC I and NCUC II involved FCC deregulation of equipment sueh as subscribers’ telephones used jointly in interstate and intrastate communication, When the FCC rescinded its interstate tariff preventing subscribers from providing their own telephones on the ground that the tariff violated the FCC’s statutory mandate to prevent unreasonable and unjustifiably discriminatory rates, see NCUC II, 552 F-2d at 1042; NCUC I, 537 F.2d at 792, some States rejoined that they could prescribe rules forbidding consumers to connect their own telephones unless the telephones were used exclusively in interstate communication. See NCUC II, 552 F.2d at 1043; NCUC I, 537 F.2d at 790. This court found that the FCC action preempted the inconsistent state regulation, since the same telephones were used in interstate and intrastate communication and since
*398state regulation prohibiting such connection would negate the federal tariff permitting such connection. NCUC II, 552 F.2d at 1043. “Something had to give.” Id.
This sort of conflict simply is not present here. As this court noted in NCUC 1, “[R]ate making typifies those activities of the telephone industry which lend themselves to practical separation of the local from the interstate in such a way that local regulation of one does not interfere with national regulation of the other.” NCUC 1, 537 F.2d at 793 n. 6.
The supposed conflict here is at least more attenuated, as the majority admits; in my view it is for all practical purposes nonexistent, and has been created by the FCC to rationalize a base for its decision. The Commission claims that if the States do not follow the FCC’s depreciation methods they will frustrate the FCC’s policy of “encouraging competition” where market conditions will support such a policy. The FCC’s claim in essence is that its newly prescribed depreciation methods, which give the carriers more revenue in earlier years, more closely reflect economic reality and thus will increase market efficiency, encourage technological innovation, and otherwise promote competition. Even if this theorizing is correct as to the effect that the FCC’s prescribed depreciation procedures for the carriers’ interstate operations will have on the highly competitive interstate communications market, I cannot see how nonconforming depreciation methods for the carriers’ intrastate operations can frustrate competition in the interstate communication markets within which there is competition. The only rationale I can find for the FCC’s position is that the States, if not required to follow the FCC’s lead, will allow the carriers less revenue from the carriers’ noncompetitive intrastate operations which the carriers could use to be aggressive in the small area in which they compete with the competitive interstate carriers.2 Besides being undesirable from the standpoint of the Communications Act, this fact strikes me as encouraging to the point of requiring the use of intrastate monopoly power to finance competition with the competitive interstate market, a practice as dangerous as it is unauthorized, for monopoly should depend for its existence on serving all at reasonable rates and should not be permitted to become a financing tool for competitive ventures.
Moreover, and more fundamentally, if the FCC can achieve preemption of state-prescribed depreciation methods by reciting the shibboleth of encouraging competition with as little showing of federal-state conflict as it has made here, it has effectively written 47 U.S.C. §§ 152(b) and 221(b) out of the Communications Act. It seems to me that any ratemaking changes that the carriers want can be adopted, if they can persuade the FCC that they need the money, for any FCC adoption may be imposed on the States by virtue of the Supremacy Clause on the ground that the resultant additional revenue will help the carriers in some theoretical way to compete in some market that need not even be specified, as it was not here. The logical result of this decision is to permit the FCC to abrogate completely the state regulation of intrastate ratemaking for the carriers’ intrastate operations in violation of the Communications Act.
Ironically, the FCC recognized established law and practice in holding, before it reversed itself only a little more than eight months later, that
“[wjhere state regulation is reconcilable with federal policies of rules, there is no occasion for us to override state agency actions in furtherance of legitimate state regulatory objectives. Section 2(b) [47 U.S.C. § 152(b) ] makes clear that Congress did not intend this Commission to foreclose state ratemaking actions unless those actions imperiled ‘important interests of national communications poli-*399cy____’ NCUC II, 552 F.2d at 1047. We have found in this instance that federal regulation will not be frustrated if carriers maintain additional records for intrastate ratemaking purposes.” In re Amendment of Part 31, 89 F.C.C.2d 1094, 1108 (1982), rev’d, CC Docket No. 79-105 (F.C.C. Jan. 6, 1983).
The Supreme Court requires that “an agency changing its course.. .supply a reasoned analysis,” Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 103 S.Ct. 2856, 2873, 77 L.Ed.2d 443 (1983), which must include a “rational connection between the facts found and the choice made.” At 2866, citing Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 245, 9 L.Ed.2d 207 (1962). The FCC’s post-hoc reinterpretation of legislative history, on which the majority here quite properly does not depend, combined with the unsupported and unsupportable statements as to the effect on competition of inconsistent state depreciation methods, do not provide even a modicum of reasoned analysis supporting the FCC’s decision to interfere in state ratemaking after several decades of affirmatively espousing the opposite conclusion.
The upshot of the case is that the FCC decided that the carriers needed more revenue than the state regulatory agencies were willing to provide, so it decided to impose different depreciation rates on intrastate equipment for the very purpose of, and thus effectively, raising the intrastate rates of the subscribers3 just as surely as if it had done so directly. I can find neither justification nor authority in the Communications Act for this action. The final irony is the FCC justification of its action on the ground that it will “...bring the benefits of competition to the ratepayers of this country.” The “benefits of competition” are higher telephone bills for local ratepayers, and I feel confident that, like the man being ridden out of town on a rail, were it not for the honor of the thing, they had rather walk.

. As this court noted in NCUC I, "[T]he provisions of section 2(b) [47 U.S.C. § 152(b) ] deprive the Commission of regulatory power over local services, facilities and disputes that in their nature and effect are separable from and do not substantially affect the conduct or development of interstate communications." NCUC I, 537 F.2d at 793.

. I have not even considered that most of the carriers are only marginally engaged in long distance (interstate) communication, that field being dominated by AT & T and its new found competitors.

. Remarkable as it may seem, these facts are either expressly or implicitly acknowledged in para. 37 of the FCC order as well as other parts.
I note in passing that, as late as NCUC I (1976) 97% of the telephone calls in the country were local. The proportion could not be too different today.