WASHINGTON-The Federal Communications Commission said a Minnesota law requiring mobile-phone carriers to give subscribers 60 days’ written notice of some proposed contract changes is pre-empted by U.S. law, a finding at odds with a recent district court decision. The statement is the agency’s strongest on the subject since it ruled four years ago that wireless operators can be forced to pay monetary damages in state litigation.
In a brief filed with the 8th U.S. Circuit Court of Appeals, the FCC argued the Minnesota statute-Article 5-is pre-empted by federal law because it constitutes rate regulation and falls outside the reach of its 2000 declaratory ruling, which was instigated by Wireless Consumers Alliance.
“Article 5 imposes a 60-day freeze on the implementation of virtually all rate increases by CMRS [Commercial Mobile Radio Services] carriers in Minnesota, which directly undercuts the federal policy of detariffing CMRS,” the FCC stated.
Congress in 1993 banned state rate and entry regulation of commercial wireless carriers, but left to states jurisdiction over “terms and conditions” of mobile-phone service.
“Article 5 … imposes state-based restrictions on an industry that increasingly prices, markets and provides its services on a nationwide basis,” said the FCC. “To comply with the potentially inconsistent rate requirements of Minnesota and other states that follow Minnesota’s example, CMRS providers might be required to withdraw or revise their nationwide service offerings.”
Article 5 was to have become effective July 1, but a lawsuit filed against Minnesota Attorney General Mike Hatch by Verizon Wireless, Sprint PCS, T-Mobile USA Inc., AT&T Wireless Services Inc. (now Cingular Wireless L.L.C.) and others delayed enactment of the wireless consumer law.
Among other things, the law requires wireless carriers to notify customers in writing of any proposed substantive change (modification, additions or deletions that could increase charges or extend a contract) two months before the change is to go into effect. Consumers have the option of agreeing to a proposed change or nixing it.
In early September, a Minnesota federal judge dissolved a temporary restraining order and largely sided with Hatch, clearing the way for the law to go into effect Sept. 15. The wireless industry then filed an emergency motion with the 8th Circuit, asking for a temporary stay pending the outcome of the carriers’ appeal of the lower court ruling.
CTIA, a national trade association of mobile-phone operators, told the 8th Circuit the stakes are huge in light of the fact that the Minnesota case is the first case to reach a federal appeals court involving a state’s attempt to regulate the wireless industry through a law specifically targeting wireless carriers.
Indeed, California and other states are flexing their muscles to saddle the wireless industry with new regulations designed to safeguard consumers and with new taxes intended to help offset budget shortfalls.
CTIA President Steve Largent, beginning his second year as head of the trade group, has identified state regulation and taxes as the two biggest challenges facing industry.
“CTIA is vitally interested in preventing the balkanization of wireless service that would result if statutes such as Article 5 are upheld … CTIA submits this amicus brief because it is critically important to prevent other states from taking similar steps to subject the wireless industry to unnecessary regulation,” the association stated.
Hatch is scheduled to file a reply brief with the 8th Circuit Dec. 2.
“We believe our law is constitutional,” said Leslie Sandberg, a spokeswoman for Hatch.
