Sprint Nextel, T-Mobile USA push pre-emption to Supreme Court

Sprint Nextel Corp. and T-Mobile USA Inc. asked the Supreme Court to review a lower court ruling that reversed a Federal Communications Commission decision pre-empting states from regulating line-item charges on wireless bills.
With the Democratic-led Congress unlikely to move on highly controversial legislation that would eliminate limited state oversight of cellphone carriers, the Supreme Court suddenly becomes a major battleground for federal pre-emption. Indeed, pre-emption-related proceedings at the FCC and in the courts may well turn on whether the high court takes the case and, if so, what it decides.
The line items at issue are fees itemized on cellular bills that seek to recover the cost of regulatory mandates and taxes imposed at the local, state and federal levels. Opponents of non-tax line items assert regulatory compliance is a cost of doing business that carriers should absorb. Wireless operators contend line-item charges enable consumers to see precisely what they’re paying for.
“The 11th Circuit erred by holding that Congress unambiguously preserved state and local authority to prohibit the use of line-items,” Sprint Nextel and T-Mobile USA told the Supreme Court in their joint filing. “As a practical matter, its decision will encourage state and local governments to adopt and hide taxes on wireless service. That will increase the cost of wireless service as well as obstruct wireless carriers’ ability to offer national rate plans that collect taxes from subscribers in the taxing jurisdiction.”
The FCC’s decision to pre-empt state regulation of line-item charges was a component of a broader truth-in-billing decision. The order was challenged by the National Association of State Utility Consumers Advocates and the Vermont Public Service Board.
“NASUCA finds it particularly ironic that the wireless carriers seek to cast the 11th Circuit’s decision as ‘anti-consumer,’ given that the FCC decision vacated by the appeals court had broadly pre-empted state laws protecting consumers from misleading and unreasonable billing practices,” the group said.
The wireless industry’s push for a Supreme Court review of last July’s 11th Circuit decision goes to the heart of 1993 legislation that forbid states from regulating wireless rates and market entry, while leaving them jurisdiction of “other terms and conditions” of cellphone service.
“Industry lost the appeal, a request for a stay of mandate, and a request for rehearing. It’s not a surprise they are trying again,” said Brad Ramsay, general counsel of the National Association of Regulatory Utility Commissioners. “It’s also not a surprise they can afford to spend the money to hire excellent attorneys who, as you would expect, did a good job on the petition. Sadly, for industry, the 11th Circuit decision is also well written and presents a more cogent view of the underlying statutory text.”
The Supreme Court pre-emption battle could impact industry’s tax suit against Kentucky and its campaign to have early termination fees deemed off limits to states.
Whether industry’s Supreme Court appeal of the 11th Circuit ruling could again derail the Kentucky litigation is unclear.
While industry prospects for securing broader federal pre-emption legislation appear slim, carriers could get relief from Congress on the tax front. Sens. John McCain (R-Ariz.) and Jim DeMint (R-S.C.) have introduced a bill that would put a three-year moratorium on new discriminatory wireless taxes by states. Meanwhile, wireless carriers have been patiently awaiting FCC action on a March 2005 petition to have ETFs considered ‘rates charged’ and therefore pre-empted by federal law.