The telecommunications landscape has been changing so fast lately that it has been hard to keep up with all the new technologies, the new regulations and the new spectrum allocations. That was before Congress added the Telecommunications Act of 1996 to the picture.
Underlying all of these issues is the more subtle, but no less important, question of “Who is in charge here?” This is not a question that will be answered after the elections in November, or by figuring out which bureau at the Federal Communications Commission now regulates your particular radio service. This question cuts to the heart of the Telecommunications Act of 1996 and the Budget Act of 1993. It asks: Who is really in charge of regulating the telecommunications industry-the FCC or the states? Although many would argue that the answer is unmistakably clear-the FCC-it often seems as though some of the states haven’t yet gotten the message.
The legislation
By now, almost everyone knows the telecommunications act-signed into law by President Clinton in February of this year-overhauled telecommunications policy enough to permit the Bell operating companies to enter the long-distance market and, conversely, to allow the long-distance carriers to enter the local telephone service market. Although there is a lot more to the act than that, the idea behind this fundamental change, as well as many other provisions, is to encourage competition by removing regulatory restrictions. The act demands that the old, unnecessarily restrictive regulations be replaced by a newer, streamlined model, which limits the states’ powers and centralizes regulatory authority with the FCC. What will this centralization mean for the wireless industry?
A lot. States and municipalities are clamoring to enact regulations or statutes that govern everything from where and how a wireless service provider can place its antenna, to the collection of a tax or fee based on revenues or subscribers. From the wireless provider’s vantage point, that raises the question: Which of these state or local laws can we avoid by asserting that the laws are pre-empted by the FCC?
As a general rule, the telecommunications act provides that no state or local regulation may prohibit any entity’s ability to provide telecommunications service. In addition, and specifically with respect to personal wireless providers, the act limits the extent to which a state or local municipality may regulate the placement, construction and modification of wireless facilities. Although a local government can impose some restriction on the placement of wireless facilities, the restriction cannot rise to the level of prohibiting the provision of telecommunications service. Some regulations for antenna facilities are presumptively pre-empted.
While the 1996 Telecommunications Act was still just an idea on Capitol Hill, the Budget Act of 1993 already had weighed in toward strengthening the federal jurisdiction over the commercial mobile radio service industry. The Budget Act of 1993 restricted a state or local government’s authority to regulate the entry of, or the rates charged by, any CMRS provider. The budget act did allow, however, that a state may regulate other “terms and conditions” of CMRS providers. As has always been understood in the arena of common carrier regulations, “terms and conditions” typically relate to such matters as customer billing information and practices, billing disputes and other consumer protection matters; facilities siting issues (e.g., zoning); the bundling of services and equipment; and matters of public safety.
Therefore, this year’s telecommunications act and 1993’s budget act combine to prohibit a state or locality from enacting any laws that effectively prohibit a communications provider from offering communications service within the state or locality. A state or municipality can enact laws to regulate the placement, construction, or modification of tower or antenna facilities, but only where the laws treat functionally equivalent services in a similar manner and do not have the effect of prohibiting communications providers from entering the marketplace. Finally, with respect to CMRS providers specifically, a state or locality cannot adopt laws that seek to regulate the rates or entry of a CMRS carrier in the telecommunications marketplace.
Local tax measures
With Congress delivering so many clear-cut restrictions on state power, why are so many states and localities adopting laws that assess fees or taxes on wireless providers?
In Texas for instance, the state legislature adopted the Public Utility Regulatory Act of 1995, which imposes significant revenue-based fees on CMRS providers as a condition of offering CMRS services in the state. The fees are intended to contribute to both a universal service fund and to a telecommunications infrastructure development fund. In Montgomery County, Md., the county council recently approved a measure to assess CMRS providers 92.5 cents per subscriber, per month, a charge the companies intend to pass on to the customer. Counties in Virginia, Washington and Florida have all adopted similar legislation.
For the localities, the assessments are an easy way to generate revenues. For many local governments, wireless telecommunications services, such as cellular phones, are viewed as being a luxury service and, therefore, fair ground for excise penalties. For a start-up CMRS provider, however, 92.5 cents per subscriber can mean the end to keeping rates and charges low enough to grow a successful business or attract small business customers. So where can a CMRS operator get some relief? Believe it or not, from the FCC.
Under the 1993 Budget Act, local governments may not enact legislation that regulates the rate and entry of CMRS providers, and the FCC is empowered to pre-empt any legislation that attempts to do so. Local statutes like those in Montgomery County, Md., or in Texas can affect CMRS rates by imposing taxes or fees that will be passed on to the customer or as a condition to entry (the CMRS provider must pay to play). The local statutes are, therefore, an impermissible exercise of local authority and should be pre-empted by the FCC as a matter of law.
During the American Mobile Telecommunications Association leadership conference last June, the Wireless Bureau’s new chief, Michele Farquhar, acknowledged that the commission was taking notice of the recent efforts by local legislators to enact taxes or levies on the emerging wireless industry. Commenting on FCC Chairman Reed Hundt’s concern that the Montgomery County tax, along with similar actions taken by other local jurisdictions, could be the start of a dangerous trend, Farquhar promised that the bureau would carefully review any complaints or requests for pre-emption brought before it.
A CMRS provider that believes a state or local statute improperly prohibits, or has the effect of prohibiting, telecommunications services within the locality, or that the local statute improperly affects the rates or entry of CMRS providers, should file a petition for declaratory ruling with the FCC requesting the commission pre-empt the statute or ordinance as an invalid exercise of state authority. Pittencrieff Communications Inc., a Texas specialized mobile radio services provider, filed such a petition in January, asking the commission declare such portions of the Texas state statute void as an improper attempt to regulate the rate and entry of CMRS providers in Texas. The FCC recently put Pittencrieff’s petition on public notice, requesting comment by Sept. 6, with reply comments due on Oct. 4.
Although the commission probably will issue a decision on the validity of the Texas statute some time in the near future, the commission’s determination with respect to Texas will not likely reach beyond Texas. Those wireless providers facing fees or taxes in other jurisdictions would be wise to raise the issue with the commission independently, seeking relief of the local statute or regulation.
Fac
ilities placement
This past spring, the commission began implementing that portion of the 1996 Telecommunications Act addressing the extent to which a local government may intervene in the placement, construction and modification of antenna or personal wireless facilities. The commission’s new rules in this area became effective on April 18. The rules prohibit a local government from imposing an outright ban on the placement of personal wireless facilities and also contain a rebuttable presumption that any state or local zoning, land use, building, or similar regulation that affects the installation, maintenance, or use of small antennas (e.g., two meters or less in commercial zones, or one meter or less in any zone) is unreasonable and is, therefore, an invalid exercise of state or local power. The locality can overcome that presumption by demonstrating that the regulation in question is: (1) necessary to accomplish a clearly defined health or safety objective stated in the text of the regulation itself; and (2) no more burdensome to satellite users than is necessary. With respect to larger antennas (larger than two meters), any local zoning, land-use, building or similar regulation that materially limits the transmission or reception of satellite earth station antenna, or imposes more than minimal costs on users of such antenna, is pre-empted unless the local regulatory entity can demonstrate that the regulation is reasonable. A regulation may be reasonable if: (1) the text of the regulation contains a clearly defined health, safety or aesthetic objective; and (2) furthers those stated objectives without unnecessarily interfering with the delivery of satellite communications services.
Regardless of a statute’s underlying rationale, a local government cannot enact any regulation that discriminates between functionally equivalent services. In other words, a statute cannot impose a more lenient permit standard for PCS facilities than that imposed for cellular facilities.
Finally, the commission’s new rules permit a party aggrieved by the application or potential application of local or state regulations to file a petition with the FCC, seeking a declaration that the state or local regulation is pre-empted. Before a petitioner seeks relief from the FCC, it must first exhaust all local administrative remedies.
Although the commission’s new guidelines on local regulations have now been in effect since April, many localities still have their old regulations on the books. Many towns and cities are still imposing permit application procedures, zoning restrictions on the placement of facilities, and extensive and costly structure code requirements on wireless providers, the results of which are slowing down the provision of new services to the public.
It could be that the towns and municipalities are not yet aware of what is going on in Washington, or of what Congress decided and the FCC implemented. The FCC does not have the resources available to seek out and review each local ordinance. So, unless local providers seek relief, the local ordinances will likely stay on the books.
However, even if a wireless provider is negatively affected by a local zoning ordinance, it must first exhaust local administrative remedies before seeking relief from the commission. Usually, the local ordinance will include some sort of grievance or appeal procedure. The aggrieved wireless provider should follow these procedures, informing the local government that its regulations might be invalid under the FCC’s new rules. If these efforts bear unsatisfactory results, the wireless provider may seek relief from the FCC by filing a petition for declaratory ruling.
The concept of turning to the FCC for relief might be, understandably, a new idea for small businesses and communications providers accustomed to years of over-regulation. Those days just might be over, at least when it comes to clearing away onerous state or local regulations. Provided the FCC does the right thing, wireless providers across the country just might be saying something they never thought they would: “Am I ever glad we have an FCC!”
Susan H.R. Jones is an attorney at Gardner, Carton & Douglas in Washington, D.C.
