Court Opinion

ID: 9885053
Source: CourtListenerOpinion
Date Created: 2023-10-06 03:28:34.519307+00
Date Added: 2024-06-11T07:48:43.550645
License: Public Domain

CONCURRENCE & DISSENT
I agree that the Minnesota Public Utilities Commission (MPUC) lacks statutory *263authority to require an incumbent local exchange carrier (ILEC) to make self-executing payments to its competitors for failure to comply with wholesale service quality standards. But because the MPUC’s wholesale service quality standards frustrate the deregulatory purpose of the Federal Telecommunications Act of 1996, 47 U.S.C. §§ 151 — 615(b) (2000) (the Act), I would hold that the federal act preempts the MPUC’s order establishing those standards.
The Telecommunications Act of 1996 fundamentally restructured the delivery of local phone service. Prior to the Act, state governments generally granted regional monopolies to heavily regulated local exchange carriers who provided local phone service to retail customers in their region. The Act facilitates entry of new phone service providers and encourages competition and deregulation by requiring regionally monopolistic ILECs to provide competitors with access to their existing networks. The stated purpose of the Act is to “promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies.”11 Telecommunications Act of 1996, Pub.L. No, 104-104, purpose statement, 110 Stat. 56, 56 (1996). To these ends, the Act places three specific duties on ILECs, namely, to allow new, competing local exchange carriers (CLECs) to interconnect with the ILEC’s local network, to provide CLECs access to unbundled parts or elements of the ILEC’s network, and to sell its retail telecommunications services at wholesale rates to CLECs for resale. 47 U.S.C. § 251 (c)(2)-(4) (2000). The Act places these duties on ILECs in light of the advantages of their longstanding monopoly and in order to encourage new market entry. But because the ultimate goals are competition and deregulation, the Act clearly and specifically defines the nature and scope of the ILEC’s duties — the ILEC is not merely to be “used as a piñata.” U.S. Telecom Ass’n v. F.C.C., 359 F.3d 554, 573 (D.C.Cir.2004).
Here, the MPUC in July 2003 issued an order adopting permanent wholesale service quality standards which include fixed minimum performance standards in six areas. Because the MPUC’s order places duties on the ILEC more onerous than those envisioned by the Act, I would hold that the Act preempts the MPUC’s action.
*264The Supremacy Clause of the Federal Constitution provides that the “Constitution, and the Laws of the United States which shall be made in Pursuance thereof * * * shall be the supreme Law of the Land.” U.S. Const, art. VI, cl. 2. Today we are attempting to discern whether Congress, in passing the Telecommunications Act of 1996, has exercised its powers under the Supremacy Clause in a manner that preempts the MPUC from imposing burdens more onerous than those envisioned by the Act on the ILEC.
Preemption can occur in multiple ways. Congress may specifically state its intention to preempt state authority. Or, if a regulatory scheme is “so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it,” state law is preempted. Fid. Fed. Sav. Loan Assn. v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982). Finally, where state law and federal law actually conflict, state law is preempted. Conflict preemption of this type may occur in either of two situations first, “where it is impossible for a private party to comply with both state and federal requirements,” or second, “where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Freightliner Corp. v. Myrick, 514 U.S. 280, 287, 115 S.Ct. 1483, 131 L.Ed.2d 385 (1995) (internal citations omitted). It is this latter form of conflict preemption that pre-eludes the MPUCs wholesale service quality standards.
We need not wonder whether, in general, Congress has preempted state regulation of local telecommunications competition. In the words of the Supreme Court, “[w]ith regard to the matters addressed by the 1996 Act, it unquestionably has.” AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 379 n. 6, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). But the Act also includes clauses which “save” certain areas of authority for state regulation, exempting them from preemption.12 As the majority correctly notes, congressional intent to preempt can be inferred from the clauses exempting certain state regulations from preemption when Congress expressly defines the scope of permissible state regulation, the intent to preempt is manifest. See Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992). The majority is also correct that the proper preemption question is “whether the MPUCs order is consistent with the scope of the role Congress preserved for the states.” But it is axiomatic that the savings clauses of the Act do not exempt from preemption state actions that stand as direct obstacles to the goals of the Act or directly conflict with the particular means selected by the Act. Further, the Act itself explicitly disallows state regulations that are inconsistent with the Act or that prevent implementation of the Act. *265See 47 U.S.C. 251(d)(3), 261(c) (2000). Thus, even some state regulations designed to ensure quality and further competition will not be saved from preemption. Here, the MPUCs order, though ostensibly intended to foster competition by “leveling the playing field,” should be held preempted as an obstacle to the goals of the Act.
The duties the Act places on ILECs are precise obligations designed to encourage competition and reduce regulation. 47 U.S.C. 251(c)(2)(C) (2000) describes the duty of ILECs to provide CLECs with interconnection service. According to that section, the ILEC has the “duty to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carriers network ⅜ * * that is at least equal in quality to that provided by the local exchange carrier to itself or to any subsidiary, affiliate, or any other party to which the carrier provides interconnection.” 47 U.S.C. § 251(c)(2)(C). As the majority notes, the Eighth Circuit has held that the phrase “at least equal in quality” denotes a “floor below which the quality of the interconnection may not go.” Iowa Util. Bd. v. F.C.C., 120 F.3d 753, 812 (8th Cir.1997). The majority argues that the Act, in establishing a floor below which quality may not fall, allows state regulators to require something more than parity from the ILEC. But this view defies logic. The Act, in placing the duty of providing interconnection on the ILEC, defines that duty in a precise way so as to serve the ultimate goals of the Act, including fostering competition and reduced regulation. The Act thus envisions a situation where the ILEC, in negotiating interconnection agreements with new market entrants, must provide equal quality services, and may, if the ILEC and the CLEC so agree, provide services of superior quality.13 Throughout this process, both parties understand what minimum is required of the ILEC. Changing the ILECs duty of interconnection to require superior quality thus alters the baseline of interconnection negotiations and fundamentally changes the Act’s process of initiating new market entries.14
Further, the majority’s view was squarely rejected by the Eighth Circuit. In rejecting an F.C.C. rule requiring superior quality interconnection, the Eighth Circuit stated, “[wjhile the phrase ‘at least equal in quality’ leaves open the possibility that incumbent LECs may agree to provide interconnection that is superior in quality *266when the parties are negotiating agreements under the Act, this phrase mandates only that the quality be equal — not superi- or. * * * Because the Commission’s rule requires superior quality interconnection when requested, the rule is not supported by the Act’s language.” Iowa Utils. Bd., 120 F.3d at 812-13 (internal citation omitted). Likewise, the MPUC order requiring superior quality interconnection must be voided as preempted by the Act’s requirement of “at least equal quality.”
The majority attempts to distinguish Iowa Utilities by noting that the F.C.C. rule at issue there required the ILEC to provide superior quality interconnection when requested, whereas the MPUC wholesale quality standards are fixed benchmarks of “measurable, predictable, and consistent quality.” But this distinction is irrelevant to proper preemption analysis. If anything, this distinction shows the MPUCs order to be more at odds with the Act than the F.C.C. rule at issue in Iowa Utilities. The Act envisions negotiations establishing the quality of interconnection, parity being the starting point of those negotiations. The F.C.C. rule at least allowed for negotiated interconnection quality. The MPUC order, on the other hand, interjects fixed benchmarks into the mix — something entirely contrary to the market-based, competitive local phone service industry envisioned by the Act. See purpose statement, 110 Stat. at 56. That the benchmarks imposed by the MPUC are fixed and measurable may, to some observers, render them more sensible. But it does not change the fact that requiring superior quality interconnection conflicts with the 1996 Act’s process of encouraging new market entries and reducing regulation.
Furthermore, the Act’s requirement that state regulations designed to ensure quality or further competition be competitively neutral weighs against the majority’s position. The majority argues that competitively neutral regulation may still impact competition because the Act expressly permits state regulation to further competition. But this merely states the obvious — • competitive neutrality is a requirement, found in the savings clauses of the Act, placed on any state regulation designed to further competition. See 47 U.S.C. § 261(c). If the requirement of competitive neutrality is to have any meaning, it cannot merely be that a state regulation be designed to increase competition. Such an interpretation makes the Act redundant, essentially reading “competitive neutrality” out of the Act. Further, there is nothing in the Act to suggest that regulations aimed at “leveling the playing field” are competitively neutral. Rather, the dereg-ulatory purpose and market-based approach of the Act suggest that competitive neutrality means just the opposite — aside from the specific duties the Act itself places on the ILEC in order to initiate competitive market entries, all other state regulations must not handicap or help the parties in the new competitive market the Act aims to construct. The majority argues that this interpretation reads the authorization for state regulations designed to foster competition or ensure quality out of the Act. On the contrary, this reading preserves a role for the states while supplying meaning to the phrase “competitive neutrality” — states may pass regulations designed to foster competition or ensure quality so long as they fairly apply to all players in the market. State regulations that assist some at the expense of others, even if designed to level the playing field, are directly contrary to the deregulatory philosophy and purpose of the Act and are therefore not saved from preemption by section 261(c).
Precedents from the Federal circuits support this view. In Cablevision of Bos*267ton, Inc. v. Public Improvement Commission of Boston, 184 F.3d 88, 105 (1st Cir.1999), the court held that competitive neutrality regarding the sharing of rights-of-way did not impose an obligation to seek opportunities to level the playing field. In so holding, the court noted that “competitively neutral” as used in 47 U.S.C. § 253(c) (2000) requires that local regulations be promulgated “in a way that avoids creating unnecessary competitive inequities among telecommunications providers.” Cablevision of Boston, 184 F.3d at 105. In U.S. West v. M.F.S. Intelenet, Inc., 193 F.3d 1112, 1120 (9th Cir.1999), the court upheld interconnection agreements assigning the costs for number portability based on each exchange carrier’s active local numbers. The court relied on an F.C.C. order holding that, while a mechanism assigning costs based on each exchange carriers active local numbers is “competitively neutral,” a mechanism requiring new entrants to bear all the costs of number portability is not. See In re Telephone Number Portability, 11 F.C.C.R. 8352, 135, 138 (July 2, 1996). Forcing any carrier to shoulder a disproportionate share of the costs would violate the principle of competitive neutrality. Finally, TCG New York, Inc. v. City of White Plains, 305 F.3d 67 (2d Cir.2002) stands for the proposition that competitive neutrality requires regulators to treat all exchange carriers even-handedly. There, the court held that a compensation fee placed on CLECs but not on the ILEC was not competitively neutral and noted that “a municipality may not * * ⅝ impose a host of compensatory provisions on one service provider without placing any on another.” Id. at 80. The majority attempts to distinguish TCG by noting that the fee imposed by the city in that case burdened the CLECs while enhancing the position of the ILEC, whereas the fixed minimum performance standards here do not burden the ILEC. This is a distinction without a difference on two counts. First, to say that fixed performance standards do not burden Qwest is simply untrue. Qwest must meet fixed performance benchmarks that require superior quality service or pay penalties directly to its competitors, and Qwest is burdened enough to pursue litigation. Second, as discussed above, competitive neutrality, if it is to be a meaningful requirement, is not satisfied merely because a regulation attempts to level the playing field. On the contrary, the Act places specific duties on the ILEC to encourage new market entrants, and beyond that requires that state regulation conform to the market-based philosophy of the Act — in other words, be competitively neutral. That the ILEC was benefited and the CLEC was burdened in TCG is immaterial. The problem was that the city attempted to “impose a host of compensatory provisions on one service provider without placing any on another.” Id. Likewise here, Qwest is burdened with fixed performance standards its competitors can ignore. This is anything but competitively neutral and is therefore contrary to the Act.
Congress in 1996 envisioned a new local phone service market stimulated by competition and less regulation. While the Act does place certain duties on ILECs in order to create a new, competitive market, those duties are narrow and well defined. Not only do the MPUC’s wholesale service quality standards fundamentally alter those duties, but they are just the kind of inflexible regulations the Act seeks to supplant. In light of all of the foregoing, I would hold that the MPUC’s order is preempted.

. Deregulation of telecommunications has been incomplete at best. Successful deregulation of other interstate industries such as truck transport and commercial aviation has included elimination of the federal regulatory bodies which formerly governed those enterprises. See I.C.C. Termination Act of 1995, Pub.L. No. 104-88, 109 Stat. 803; Airline Deregulation Act of 1978, Pub.L. No. 95-504, 92 Stat. 1705. The same is not true with regard to telecommunications deregulation. Instead, the scope of the F.C.C.'s power has grown substantially since deregulation. See Adam Thierer, Four More Years of the Status Quo? How Simple Principles Can Lead Us Out of the Regulatory Wilderness, 57 Fed. Comm. L.J. 215, 220 (Mar.2005). This, and the failure of the courts to find preemption of local regulatory authority, has led to a complex web of state and federal regulations touching every aspect of the industry, arguably negating the intended benefits of deregulation and the purposes of the Act. See id. at 219-20. The majority correctly notes that the commentator cited here argues that Congress should act to ensure preemption of state and local regulatory authority. Id. But the proposition that Congress should act to ensure preemption does not preclude this court from enforcing what Congress has already done. Whether Congress ultimately reforms telecommunications regulation, the fact remains that the standards imposed upon Qwest in the present case frustrate the purposes of the 1996 Act.

. 47 U.S.C. § 253(b) (2000), regarding service quality and consumer rights provides:
Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis * * * 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.
Likewise, 47 U.S.C. § 261(c), regarding requirements to foster competition provides:
Nothing in this part precludes a State from imposing requirements on a telecommunications carrier for intrastate services that are necessary to further competition in the provision of telephone exchange service or exchange excess, as long as the State's requirements are not inconsistent with this part or the Commission's regulations to implement this part.

. The ILEC is required to negotiate in good faith an agreement that accomplishes the Acts goals with new market entrants requesting interconnection services, 47 U.S.C. 251(c)(1), 252(a)(1) (2000), and if the parties fail to agree, the state utility commission will arbitrate and resolve open issues. 47 U.S.C. 252(b) (2000).

. The majority notes that in the present case, Qwest agreed to bypass the negotiation stage and instead participate in an expedited proceeding before the MPUC to set permanent wholesale service quality standards. But it is difficult to understand how Qwest’s agreement to bypass negotiations has any bearing on whether the standards ultimately imposed by the MPUC conflict with the Act. Fixed benchmarks impermissibly burden the ILEC beyond what the Act requires to foster competition — interconnection of at least equal quality-
Further, it is neither noteworthy nor relevant to preemption analysis that the MPUC found that its minimum service quality standards "largely coincide[] with service quality standards” under Qwest’s 1996 interconnection agreements with the CLECs and Qwest's AFOR plan. The MPUC's standards do not entirely coincide with the standards set in 1996 and Qwest's AFOR plan. But far more importantly, the Act envisions a system of negotiation and arbitration whereby the ILEC may ultimately agree to standards that exceed parity. Here, state regulators imposed such standards against Qwest's will.