Robert W. Quinn is a Partner with Wilkinson Barker Knauer LLP in Washington, DC .

Last week, the Federal Communications Commission (“FCC”) once again largely prevailed over state and local governments using its preemption authority under the Communications Act of 1934 (the “Act”)  to remove perceived barriers to deployment of broadband infrastructure.  In City of Portland v. United States, ___ F.3d ___ (9th Cir. 2020)(Case No. 18-72689, Aug. 12, 2020), the Ninth Circuit turned away several challenges to two FCC Orders which had restricted how state/local governments managed their rights-of-way (“ROW”) when accessed by broadband service providers (while remanding one aspect of the Small Cell Order).¹

In the “Moratoria Order,” the FCC ruled that municipal actions which specifically  halt 5G deployment violate Section 253(a) of the Act when they effectively prohibit deployment of 5G technology for extended periods of time.  In the “Small Cell Order,” the FCC placed restrictions on the fees that state and/or local governments can charge for access to rights-of-way, and on the “aesthetic requirements that could be imposed on carriers as a condition to constructing 5G technology.”  The Small Cell Order also a) broadened the FCC’s pre-existing shot-clock rules for municipalities to act on applications for zoning permits to now include all telecommunications permits; and b) shortened the timeframes in which a municipality must act on those applications.

The Small Cell Order took the agency into areas it had not previously ventured: ROW fees charged by municipalities for accessing municipal infrastructure. While several courts have addressed ROW fees,² the FCC had never restricted a municipality’s ROW fee structure.  In the Small Cell Order, however, the FCC found that ROW fees must represent a reasonable approximation of costs involved, with only objectively reasonable costs included, and that the ROW fee could be no higher than fees charged to similarly situated competitors in similar situations.  In addition, the agency created a safe-harbor; below which the fees were deemed to be reasonable—$500 for an application fee and recurring fees less than $270 per year.  In a potentially ominous turn for the industry, given an election year, the vote on this issue was split along party lines with the Democrat Commissioners dissenting.³  Despite the partisan nature of the action, the FCC largely prevailed on appeal.

At the outset, the Ninth Circuit noted the long litigious history of Section 253(a).  That section dictates that no “State or local 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.”  While the Act preserves local zoning authority, Section 253(a) (as well as its Title III counterpart for wireless services, Section 332(c)(7)) provides the FCC with a tool to ensure that state/local actions in zoning and permitting do not constitute a barrier to the construction of communications infrastructure.  The court observed that the controlling Ninth Circuit interpretation for the meaning of the phrase “may prohibit or have the effect of prohibiting” was similar to the standard articulated by the FCC: that the requirement materially inhibits the deployment of 5G services.⁴ The court also stated that as the expert agency charged with interpreting an ambiguous statute, the FCC was entitled to Chevron deference; meaning that so long as the FCC statutory interpretation was reasonable and supported by evidence, the court must defer to the agency’s judgment.

The Ninth Circuit bucketed the state/local objections into three categories: fees, timeframes, and aesthetics.  On fees, the court first noted that even where a state/local fee exceeded the safe-harbor, the fee was not automatically preempted but that the state/local entity had the opportunity to demonstrate the fee was cost-based.  Next, it accepted the FCC’s arguments that above-cost ROW fees were having a prohibitive effect on the national deployment of broadband infrastructure and that the record contained evidence that high costs had led carriers to stop deploying in certain cities.⁵   The court also observed that given limited capital budgets, excessive fees charged in one area could deplete the capital budgets of carriers, such that they would not be able to build in other areas.  Further, the court accepted the FCC’s argument that there was no administrable, non-cost-based, alternative approach.  Given the totality of the FCC’s arguments, the court accepted the proposition that excessive ROW fees could materially inhibit the deployment of 5G technology nationally and affirmed the framework set forth by the FCC.

On shot clocks, the court similarly noted that the FCC shot clock structure simply created a series of presumptions rather than, for example, a “deemed granted” permit, as the telecommunications carriers had argued.  A carrier would still have to sue the local entity to obtain the appropriate permit.  The court thus rejected the argument that a shortened clock would deprive a local entity from conducting a traditional zoning review.  Additionally, it accepted the FCC’s argument and evidence that showed it was possible for some state and local entities to complete permit reviews faster today than when the original shot clock was enacted in 2009.  Finally, the court also agreed that the scope of Section 253(a) was broader than “zoning” alone and supported the FCC’s expansion of the shot clock to all permitting decisions.

It was not a compete victory for the FCC, however, given that the Ninth Circuit disagreed with the Commission’s determination that “aesthetic requirements” be reasonable; no more burdensome than those applied to other types of infrastructure deployments; and that they be objective and published in advance. The court noted that the language of Section 332(c)⁶ only requires that state regulation of personal wireless services not “unreasonably discriminate against providers of functionally equivalent services.”  Given that FCC’s standard did not permit any discrimination, even between physically different services, the Ninth Circuit found the standard inconsistent with the statute.  In addition, because the statue only governed distinctions with “functionally equivalent services,” the court found that FCC’s comparative standard—which assesses 5G deployments against all other types of infrastructure deployments—was also overly broad as well.  Finally, the court took issue with the requirement that the aesthetic standard be objective.  It noted that the FCC’s  justification that all subjective requirements substantially increase providers’ cost without providing any public benefit was “unexplained and unexplainable” and remanded that section of the Order.⁷

Local ROW policies have long been a source of contention between and communications companies and local/state governments.  Some municipalities have used ROW fees as a source of revenue which has resulted in litigation over the years.⁸ Other municipalities’ permitting and zoning processes have delayed construction; raising costs and delaying deployment.  The FCC’s continued intervention in this area has been a boon to communications carriers and the deployment of broadband infrastructure.  Given this an election year, the question becomes whether the FCC will continue these pro-deployment policies in a post-pandemic environment, where recent decisions have been drawn along party lines, and local governments are historically strapped for cash.  No doubt, more to come.

Notes

1. Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Inv., 33 FCC Rcd. 9088 (2018) (“Small Cell Order”); Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Inv., 33 FCC Rcd. 7705 (2018) (“Moratoria Order”).  In the Moratoria Order, the Ninth Circuit also upheld the FCC’s implementation of “One-Touch-Make Ready” rules for utility poles pursuant to the authority granted to the FCC under Section 224 of the Communications Act of 1934 (the “Act”) (47 U.S.C. § 224). That part of the “Moratoria Order” had been challenged by public power companies (owners of public utility poles).
2. See, e.g., TCG New York, Inc. v. City of White Plains, 305 F. 3d 67 (2d Cir. 2002); Qwest Corp. v. City of Santa Fe,  380 F. 3d 1258 (10th Cir. 2004); Puerto Rico Telephone Company, Inc. v. Municipality of Guayanilla, 450 F. 3d 9 (1st Cir. 2006).
3. Heightening the concerns regarding the partisan divide on this issue, Cong. Anna Eshoo (D. Ca) introduced H.R. 530, The Accelerating Broadband Deployment by Empowering Local Communities Act, co-sponsored by 59 other fellow Democrats to undo the FCC’s action particularly as it related to restricting the fees municipalities could extract for access to their ROW.
4. Citing Sprint Telephony, PCS, L.P. v County of San Diego, 543 F.3d 571, 578 (9th Cir. 2008)(en banc).
5. According to AT&T, it had stopped building in Portland due to recurring annual fees that ranged from $3500-$7500 per node.
6. 47 U.S.C. § 332(c)(7)(B)(i)(I).
7. The court also summarily rejected an argument that municipalities and public power companies were acting in their roles as private property owners and thus outside the scope of permitted preemption.
8. See infra, n.2.