Robert W. Quinn is a Partner with Wilkinson Barker Knauer LLP in Washington, DC and serves as the WLF Legal Pulse‘s Featured Expert Contributor on Communications Regulation.
The relationship between the federal government (particularly the Federal Communications Commission (FCC)) and state/local governments has always been interesting to watch. In many ways, state actions promoting competition for local telephone services served as a catalyst for the Telecommunications Act of 1996 (the “1996 Act”). Congress took that baton and turned telephone competition into national policy. That does not mean, however, that that federal/state relationship has not be free of ups and downs over the years, particularly as they relate to state and local oversight over carriers, services, or access to rights-of-way (as well as the fees generated by access to those rights-of-way (“ROW”)).
To promote a competitive telecommunications infrastructure, the FCC has historically used its preemption authority aggressively to encourage, first, communications investment and then, as voice service gave way to the internet, the broadband infrastructure investment. In the wake of the 1996 Act, the FCC preempted dozens of state/municipal laws that attempted to regulate carriers, services, or infrastructure deployment that the agency deemed would be a barrier to that investment.1 Another wave of preemption arose in the mid-2000s emanating from state attempts to regulate the nascent VOIP industry; as voice was perceived as a “killer app” for broadband.2 The advent of 4G wireless infrastructure brought another flurry of preemptions as carriers sought to deploy more fiber and densify their infrastructure.3 Today, with a national desire for faster, fiber-based wireline broadband and the worldwide race to 5G wireless network superiority, not surprisingly preemption has raised its head again.
For the fourth time in less than a year, the FCC has used its preemption authority to override certain state and local regulations which it deemed deterrents to investment in broadband infrastructure in the United States. The latest FCC preemption targets are local/state cable franchising laws which authorize the imposition of additional fees on cable providers for providing non-cable services to consumers (like broadband). Those fees are assessed either through the imposition of an additional fee applied to revenue derived from non-cable services or by charging additional fees on cable providers for utilization of the franchising authority’s ROW to provide those services (even though the same facilities are used to provide video services for which the franchise authority is compensated through the 5% cable franchise fee). For example, the Oregon Supreme Court recently affirmed Eugene, OR’s imposition of an additional 7% telecommunications license fee on the provision of broadband service over a franchised cable system with mixed use facilities.4
The FCC in its new § 621 Order5 finds that state/municipalities are limited by statute to recover only the 5% franchise fee for the provision of video services irrespective of the other services offered over that cable system. The agency further found that the 5% franchise fee also covers all ROW access so that municipalities cannot also charge extra ROW access fees to provide “mixed-use” services. Consequently, the Order expressly overrules the City of Eugene decision as well as other state or local attempts to impose fees in addition to the 5% franchise fee. Once approved, any state or municipal attempt to recover more than that 5% franchise fee for services or ROW access will be subject to FCC preemption.
The FCC § 621 Order follows an action taken by the agency three weeks earlier that preempted a local San Francisco ordinance which, on its face, appeared to require building owners in multi-tenant environments (MTEs) to provide competitive access to inside cable wiring even if that wiring was in use.6 The FCC’s preemption Order noted that the wording of the ordinance did not appear so limited but restricted its preemption to in-use wiring. Id. ¶52. Nonetheless, the City has announced it intends to appeal. The FCC has long regulated the area of cable inside wiring and cable technical standards.7 In addition, the FCC has prohibited cable or communications providers from entering into exclusive contracts with building owners as a means to enable competition in MTEs.8 But the FCC has, since the mid-2000s, prohibited the sharing of broadband infrastructure in order to promote deployment of such infrastructure.9 By preempting the sharing of “in-use” cable wiring in the MTE Order, the FCC stated it was extending that pro-investment philosophy for inside wire to encourage investment in all forms of broadband infrastructure.
Late last year, the FCC also utilized federal preemption in two other areas related to broadband infrastructure. First, it preempted state and local regulations designed to create “Moratoria” periods during which the construction of communications infrastructure was prohibited. The FCC also set forth a national framework (with shot clocks) for small-cell deployment in public rights-of-way. The building “Moratoria” item, issued in August, was significant in that the agency preempted a means by which state and local governments were impeding the deployment of communications infrastructure; not by denying building or ROW permits, but rather by freezing all applications, permitting or construction in public-rights-of-way for defined (or sometimes undefined) periods of time.10 The FCC found, among other things, that states and municipalities were using “Moratoria” periods to evade the cell-siting-infrastructure shot-clock time periods it had enacted in the 4G Orders from 2009 and 2014. The FCC as a result declared that all “Moratoria” periods were a violation of the § 253(a) prohibition on state or local regulations that “prohibit or have the effect of prohibiting the provision of telecommunications services” and thus preempted.
In September 2018, the FCC addressed the issue of small-cell deployment necessary to densify wireless infrastructure for the evolution to 5G services.11 Mobile broadband infrastructure has evolved from cell towers serving several square miles (with DS1/DS3 backhaul) to a dense fiber infrastructure with small cells serving areas as small as several hundred meters. In that environment, the FCC has promoted timely and economically efficient deployment of small-cell architecture to speed the evolution to 5G Technology.
In the September Small Cell Order, the FCC first reaffirmed that the test for whether an ordinance or rule “prohibits or has the effect of prohibiting” the provision of telecommunications or personal wireless services12 would be whether the regulation “materially inhibits the ability of any competitor to compete in a fair and balanced legal and regulatory environment. ¶35. Second, the FCC established that the fee structure for access to rights-of-way must be “cost-based.”¶50. Third, the FCC clarified that rights-of-way includes, not only underground conduit or street access, but also the use of government property within the ROW like street lamps and traffic lights.¶54. Finally, in the Report & Order section, the FCC instituted “safe harbor” application fees and shot clocks for states or municipalities to respond to requests for collocation on existing structures or for new structures in the public ROW. ¶¶ 79, 105.
While the last twelve months have been remarkable in terms of the FCC’s frequent exercise of its preemptive authority to restrict states and municipalities from inadvertently (or advertently) imposing additional barriers to broadband infrastructure deployment, these actions are merely the latest chapter (in a long-running story) of the importance to our nation’s economy to have a world-leading broadband infrastructure in the United States. Given both the economic and strategic importance of winning the race to 5G, you can expect the FCC to remain active and vigilant in this area in future.
To that end, in the § 621 proceeding, the FCC asserted incredibly broad preemption authority pursuant to § 636(c) of the Communications Act of 1934 (“The Act” )13 stating that: “[t]he reference in section 636(c) to “this chapter” means that Congress intended to preempt any state or local law (or any franchise provision) that is inconsistent with any provision of the Communications Act, whether or not codified in Title VI. Draft Order at ¶81. Ostensibly, the agency must have felt broad preemption authority that went beyond Title VI was necessary to specifically address the Eugene ordinance imposing a 7% tax on broadband services (which the FCC has declared are information services). But there may be a more pressing need for identifying a new preemption basis.
The agency’s traditional infrastructure preemption authority has been § 253(a) of The Act. By its definition, § 253(a) grants express preemptive authority for regulations that prohibit carriers from providing a “telecommunications” service. Given the FCC’s Restoring Internet Freedom Order (which declared reclassified broadband as an information service) and the recent Eighth Circuit case in Charter v. Lange, _ F.3d _ (2018) (No. 17-2290) (affirming a district court decision classifying fixed interconnected VOIP as an information service) one can envision a world soon where none of the communications service offerings provided by an ISP are classified as a telecommunications service. Consequently, perhaps the lasting impact of this round of preemption decisions will be the § 621 Preemption Order’s identification of the authority upon which the FCC will rely in the future to continue to use preemption as a means to remove regulations or fees which it determines pose a barrier to broadband infrastructure investment.
- See, e.g., Classic Telephone, Inc. Petition for Preemption, Declaratory Ruling, and Injunctive Relief, Memorandum Opinion and Order, 11 FCC Rcd 13082, (1996); California Payphone Association Petition for Preemption, Memorandum Opinion & Order, 12 FCC Rcd 14191 (1997), (released July 17, 1997); Public Utility Comm’n of Texas Petition for Declaratory Ruling and/or Preemption of Certain Provisions of the Texas Public Utility Regulatory Act of 1995, Memorandum Opinion and Order, 13 FCC Rcd 3460 (1997).
- Minnesota Public Utilities Comm’n v. FCC, 483 F.3d 570 (8th Cir. 2007) (consolidated appeal).
- Petition for Declaratory Ruling to Clarify Provisions of Section 332(c)(7) to Ensure Timely Siting Review, Declaratory Ruling, 24 FCC Rcd 13994, 14016, para. 56 (2009) (2009 Declaratory Ruling), aff’d, City of Arlington v. FCC, 668 F.3d 229 (5th Cir. 2012) (City of Arlington), aff’d, 569 U.S. 290 (2013); Acceleration of Broadband Deployment by Improving Wireless Facilities Siting Policies, Report & Order, 29 FCC Rcd 12865, 12966, 12973, paras. 243, 270, (2014) (2014 Wireless Infrastructure Order), aff’d, Montgomery County v. FCC, 811 F.3d 121 (4th Cir. 2015) (Montgomery County). In 2016, the FCC unsuccessfully attempted to preempt state limits on municipality-provided broadband services. Tennessee v. FCC, 832 F.3d 597 (6th Cir. 2016).
- City of Eugene v. Comcast of OR, II, 375 P.3d 446 (OR 2016).
- Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as Amended by the Cable Television Consumer Protection and Competition Act of 1992, Third Report & Order (Draft), MB Docket No. 05-311 (FCC CIRC 1908-08) (the FCC § 621 Order).
- Improving Competitive Broadband Access to Multiple Tenant Environments; Petition for Preemption of Article 52 of the San Francisco Police Code Filed by the Multifamily Broadband Council, GN Docket No. 17-42, MB Docket No. 17-91 (July 10, 2019) (the “MTE Order”). Interestingly, in the days leading up to the FCC’s Open Meeting on this item, the City of San Francisco filed in the proceeding asserting that the ordinance did not require access to in-use wiring. Id. ¶51.
- See Review of Sections 68.104 and 68.213 of the Commission’s Rules Concerning Connection of Simple Inside Wiring to the Telephone Network, Order on Reconsideration, Second Report and Order and Second Further Notice of Proposed Rulemaking, 12 FCC Rcd 11897, 11917-18, paras. 31-32 (1997); Telecommunications Services Inside Wiring et al., First Order on Reconsideration and Second Report and Order, 18 FCC Rcd 1342, 1343, para. 4 (2003 Inside Wiring Order); Cable Television Technical and Operational Standards et al., Report and Order, 32 FCC Rcd 7754, 7755 n.2 (2017) (2017 Cable Technical Standards Order).
- Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments, MB Docket No. 07-51, Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd 20235, 20235, para. 1 (2007) (2007 Exclusive Service Contracts Order), aff’d, National Cable & Telecommun. Ass’n v. FCC, 567 F.3d 659 (D.C. Cir. 2009) (NCTA).
- Unbundled Access to Network Elements et al., Order on Remand, 20 FCC Rcd 2533, 2633-2635, paras. 182-185 (2005) (Triennial Review Remand Order) (declining to require unbundling of dark fiber loops in part because “an overly broad dark fiber unbundling regime would undermine deployment, pushing competitors to use incumbent-owned fiber rather than building their own alternatives where it is economic to do so”).
- Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment; Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84, WT Docket No. 17-79 (Aug. 2, 2018).
- Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WT Docket No. 17-79, WC Docket No. 17-84 (Sept. 26, 2018).
- The language contained in Title II and Title III preemption language. 47 U.S.C. § 253(a) and 47 U.S.C. § 332(c)(7).
- 47 U.S.C. § 556(c).