WASHINGTON-The Federal Communications Commission is moving closer to deciding whether to seek a rehearing or possibly a Supreme Court review of a federal appeals court’s rejection of rules that pre-empt states from regulating certain line items on consumers’ monthly bills, according to a top agency official last week.
The decision by the 11th U.S. Circuit Court of Appeals to throw out the FCC’s truth-in-billing order and the agency’s unsettled legal strategy appear to have thrown major wireless rulemakings into limbo as well as changed the dynamics in telecom reform legislation and pending litigation around the country.
The FCC last year ruled states cannot regulate non-tax line items on wireless bills as part of a broader decision extending federal truth-in-billing regulations to mobile-phone operators. The decision prompted challenges from the National Association of State Utility Consumer Advocates and the Vermont Public Service Board.
Regulatory recovery fee charges are levied routinely by cellular operators to defray the cost of federal and state mandates such as local number portability, enhanced 911 and universal service. NASUCA asserted such charges are deceptive because they can come across to consumers looking like state and federal taxes. Operators insist regulatory recovery fees help consumers see precisely what they are paying for.
In its 2005 decision, the FCC said state rules either requiring or prohibiting line items on wireless bills amounted to illegal rate regulation. The wireless industry agreed, pointing to a 1993 federal law prohibiting state regulation of wireless rates and market entry. The same law reserves to states oversight of other terms and conditions of wireless service. Consumer proponents and many state regulators argued the latter reserve clause gives states oversight of non-tax line items on wireless bills.
Petitions for rehearing the 11th Circuit case are due Sept. 14. A rehearing can be held by the same three-judge panel that issued the truth-in-billing decision and/or the full appeals court. If the FCC chooses to pursue a legal challenge at the rehearing level, and loses, it would then have to decide whether to ask the Supreme Court to take the case.
The decision whether to mount a serious legal fight over the 11th Circuit truth-in-billing ruling is a major one. The FCC, under Chairman Kevin Martin, has tended to side with industry on federal pre-emption primacy in consumer and health-related agency rulemakings and litigation. Until the FCC decides its legal approach to the 11th Circuit ruling, the agency could find it difficult to move forward on a follow-up truth-in-billing rulemaking and an industry petition to pre-empt states from tampering with early-termination fee practices.
The FCC and cellular industry have to consider something else as well. The Supreme Court in early October is expected to decide whether to accept an appeal of a wireless consumer ruling lodged by Minnesota Attorney General Mike Hatch. The 8th U.S. Circuit Court of Appeals late last year agreed with industry’s federal pre-emption arguments and threw out a Minnesota wireless consumer law that would have required wireless carriers to give consumers two months advance notice of service contract changes.
The outcome of the 11th Circuit case also had been awaited by a Kentucky federal court presented with similar issues. Cingular Wireless L.L.C., Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA Inc. last year sued Kentucky to challenge a tax law forbidding telecom carriers from passing on to consumers a 1.3-percent gross receipts tax. Carriers argued non-Kentucky cellular customers on national calling plans would have to absorb most of the cost of the state tax without gaining any benefit.
Last December, U.S. District Judge Karen Caldwell temporarily suspended legal proceedings in the Kentucky lawsuit until the 11th Circuit ruled in the truth-in-billing case.
Meanwhile, the wireless industry is pressing Congress for expanding federal pre-emption.
