FCC 5G Orders Largely Upheld by 9th Circuit

“The court rightly affirmed the FCC’s efforts to ensure that infrastructure deployment critical to 5G ... is not impeded by exorbitant fees imposed by state and local governments, undue delays in local permitting, and unreasonable barriers to pole access,” Pai said in a statement.

The court rejected constitutional challenges to the small-cells and moratoria orders. Deferring to FCC interpretation of sections 253(a) and 332(c)(7) of the Telecom Act, the court said the orders were mostly “in accord with the congressional directive in the Act, and not otherwise arbitrary, capricious, or contrary to law.” The FCC doesn't have to demonstrate an actual prohibition before preempting municipal regulations because that wasn’t required under the 9th Circuit's 2008 en banc decision in Sprint v. San Diego, wrote Judge Mary Schroeder for the panel with Judges Jay Bybee and Daniel Bress. "The FCC here made factual findings, on the basis of the record before it, that certain municipal practices are materially inhibiting the deployment of 5G Services.” The material inhibition standard may apply more strictly here than it did for older technologies because 5G requires “rapid, widespread deployment of more facilities,” she said.

The court agreed with localities' objection to one aspect -- an FCC limit on localities’ authority to regulate aesthetics, which drew debate at oral argument (see 2002100054). “To the extent that provision requires small cell facilities to be treated in the same manner as other types of communications services, the regulation is contrary to the congressional directive that allows different regulatory treatment among types of providers, so long as such treatment does not ‘unreasonably discriminate among providers of functionally equivalent services,’” Schroeder said. Requiring aesthetic criteria to be “objective” lacks reasoned explanation, she added. The court vacated those parts of the rule and remanded them to the FCC.

Bress partly dissented because he disagreed with upholding the FCC preempting fees to telecom providers that exceed a locality’s costs. Bress said the FCC failed to adequately explain how all above-cost fees would equal an “effective prohibition” on service under sections 253 and 332.

Commissioner Brendan Carr is “very gratified by the 9th Circuit’s decision upholding the common-sense reforms we put in place in 2018,” including that “exorbitant fees are prohibited” under sections 253 and 332, he said in an interview. There’s not “much daylight between what the 9th Circuit said and what the FCC said” about the remanded aesthetics rule, said Carr, noting the court agreed such requirements should be reasonable. The commissioner hasn’t “worked through” what should be the FCC's next steps on that issue, he said. The panel's majority had it right on the fees issue, but even the dissenting judge agreed fees can be effectively prohibitory, Carr said.

Carr sees nothing that “would really draw much interest in terms of en banc” or other appeal, he said. “The path forward from here for litigants is all but over.”

"We are pleased with some aspects of the decision, and disappointed in others," emailed Best Best's Joseph Van Eaton, who argued for many localities in the case. "We are still in the process of analyzing the decision, and assessing its impacts. That analysis is complicated by the fact that the decision cabins the FCC Small Cell Order in several ways that should be helpful to local governments." Local governments are "very happy with the win on the aesthetic regulations -- arguably our most critically important issue," emailed attorney Ken Fellman.

Local governments will review next steps after studying the opinion and Bress’ “well-reasoned dissent,” emailed Spiegel & McDiarmid’s Tillman Lay. The local telecom attorney is pleased by the court's reversal of the FCC on aesthetic rules “but disappointed with its upholding of the other aspects” of the small-cells order, he said.

NATOA, the National League of Cities and the American Public Power Association didn’t comment Wednesday.

Fees Disagreement

The FCC wasn’t setting rates for using the right of way, Schroeder said. “It was determining a level at which fees would be so clearly reasonable that justification was not necessary, and litigation could be avoided. The presumptive levels are not arbitrary and capricious.” Limiting fees doesn't violate Section 253(c) requiring fair and reasonable compensation, the judge wrote. “This does not mean that state and local governments should be permitted to make a profit by charging fees above costs.” The record supports FCC's conclusion that high fees inhibited deployment within and outside areas charging the fees, she said.

“Administrability is important,” the judge said about the FCC's cost-based method for evaluating local fees. Localities “are implicitly suggesting an alternative approach that would require an examination of the prohibitive effect of fees in each of the 89,000 state and local governments under the FCC’s jurisdiction, a nearly impossible administrative undertaking.”

Bress would have vacated and remanded the prohibition on above-cost fees, he wrote in a partial dissent. “No one doubts that exorbitant fees can impede the deployment of communications infrastructure. ... But fees are prohibitive because of their financial effect on service providers, not because they happen to exceed a state or local government’s costs.” The FCC didn’t describe “the frequency of above-cost fees or the amounts that localities have generally charged above cost,” or show that “above-cost fees effectively prohibit service in many, most, or a plurality of cases.”

Judges agreed there were holes in the aesthetics rule. The FCC's conclusion "that all subjective standards are without public benefit and address no public harm, is unexplained and unexplainable,” wrote Schroeder. “At the very least, the agency must explain the harm that it is addressing, and the extent to which it intends to limit regulations meant to serve traditional zoning objectives of preventing deployments that are unsightly or out of neighborhood character.” The FCC may require aesthetic regulations to be reasonable, the court said.

The Telecom Act supports expanding shot clocks to all permitting decisions, and the FCC gave "sound reasons,” Schroeder wrote. Shot clocks don't violate 10th Amendment prohibition on requiring local governments to enforce federal law because here the FCC is interpreting and enforcing the Telecom Act, "adopted by Congress pursuant to its delegated authority under the Commerce Clause." The court rejected industry’s claim that the order didn’t go far enough by not including a “deemed granted” provision when shot clocks run out.

The court said it doesn’t read the moratoria order as broadly as Portland, Oregon, which claimed it would preempt all restrictions on construction, even seasonal ones. The FCC’s December RF safety order mooted a challenge by Montgomery County, Maryland, the court said.

The court disagreed with public power companies that the small-cells order improperly regulates rates under Section 224, which excludes government-owned utilities. The FCC tapped its Section 253 authority to ensure state and local laws don’t prohibit telecom services, it said. Also, the court rejected utilities’ challenges to parts of the OTMR rule. The OTMR order’s overlashing rule doesn't impede a utility's exercise of its statutory authority to deny pole access, the court said. The preexisting violation rule doesn’t conflict with Section 224(f)(2) allowing utilities to deny access for safety reasons, it said. The court found no procedural issue with the FCC adopting the self-help rule and said the order’s rate reform rule was an appropriate exercise of Telecom Act authority.

Industry Cheers

CTIA President Meredith Baker called the decision “an extremely important victory” for consumers and the economy. “The court got it right, correctly affirming the FCC’s authority to establish reasonable guardrails to guide both the wireless industry and local governments in their shared goals of speeding the deployment of next-generation wireless networks and maintaining U.S. leadership in the emerging 5G economy,” she said. Verizon Senior Vice President-Federal Regulatory Will Johnson agreed it’s a “big win.” T-Mobile Senior Vice President-Government Affairs Kathleen Ham tweeted plaudits.

The “grand slam” for 5G deployment “removes obstacles to broadband deployment and eliminates unnecessary delays,” said Wireless Infrastructure Association President Jonathan Adelstein. Competitive Carriers Association President Steven Berry said the decision “allows wireless carriers to continue to work with state and local governments to deploy next-generation networks and close the digital divide, while importantly ensuring that outlier regulations do not inhibit deployment.”

Incompas CEO Chip Pickering cheered the court for upholding the OTMR order. “The court is giving the green light to new builders and helping to clear the deck of potential anti-competitive roadblocks that hold back 5G.” ACA Connects CEO Matthew Polka gave kudos: “Far too often investor-owned utilities hold up or seek to impose excessive fees on new attachers, which can result in the new attacher deciding to walk away from a build.” The U.S. Chamber of Commerce also applauded.

The 9th Circuit is often a “perilous venue for federal agencies,” but Wednesday’s decision “is a strong reaffirmation of the broad preemption authority that Congress delegated to the FCC to ensure that states and localities cannot impede the provision of communications services,” said Free State Foundation President Randolph May.