NaLA Rebukes FCC 'Observations' on Challenged Calif. LifeLine Rule

The CPUC is appealing a ruling from the U.S. District Court for Northern California, which agreed with NaLA that a 2020 state rule is federally preempted rate regulation. In the 2020 decision, the CPUC conditioned state low-income support on wireless companies providing minimum service standard plans with a $0 copayment.

The FCC said its August brief supported neither party. The agency said it "has never addressed whether states may advance universal service by requiring wireless providers to offer minimum service standard plans with a $0 copayment as a condition of receiving state subsidies through a voluntary program like California LifeLine.” Commissioner Brendan Carr last week agreed with that position (see 2210210073).

However, the FCC brief went on to make "three observations that might inform the Court’s disposition." The California "co-payment requirement might not 'regulate' rates in the sense used in Section 332,” it said. "FCC orders have consistently held that many state regulations that indirectly affect rates are not preempted.” And the FCC pointed out a possible defense not invoked by the CPUC: the D.C. Circuit's 1999 Pittencrieff decision. "The FCC has held (and the D.C. Circuit affirmed) that Section 332 exempts from preemption certain state requirements -- including rate regulations -- once wireless service 'has become vital to universal service.'" Since parties didn’t bring that up, “the FCC asks the Court to take care not to cast doubt on California’s ability to avail itself of Pittencrieff in a future proceeding should California choose to reenact a $0 co-payment requirement.”

The FCC “raises issues and arguments not pursued by the parties and not ruled on by the lower court,” NaLA responded Friday. “It speculates endlessly about what the [CPUC] might have meant or might do in the future. It muses that perhaps the agency decision challenged in this litigation -- a CPUC rulemaking bearing all the hallmarks of a regulation -- may not really be a 'regulation.' And it ponders a method by which States might (or might not) in the future potentially avoid the preemptive effect of 47 U.S.C. § 332(c)(3)(A).” On the last point, NaLA said, "Post hoc appellate justifications -- whether offered by a party or an amicus -- cannot save a regulation that lacked valid justification at the time it was adopted."

Arguing the CPUC’s "decision ... 'might not' be a regulation rests on reasoning that is legally incorrect, and it entirely ignores the extensive Record evidence regarding the promulgation, practical application, description, and effect of the challenged decision -- all of which point to its regulatory nature,” NaLA said. The FCC wrongly believes the CPUC’s alleged violation can be overlooked because carriers could withdraw from the state program, said the Lifeline providers. “They cannot,” but even if they could, federal law bans state from regulating wireless rates regardless of the rule’s duration or rate-setting effect, said NaLA: While a state rule may avoid preemption if regulating non-rate terms and conditions, the challenged rule “has a direct, express, and mandatory effect on wireless rates.”

"The district court erred precisely because it concluded without analysis that the state action here amounted to regulation preempted by Section 332," the CPUC responded Friday. The lower court “ruling contradicts the language or purpose of the statute, is contrary to case law, and conflicts with the FCC’s decisions -- decisions intended to provide guidance to the courts.” While the rule “affects carriers’ ability to receive state universal service support,” California LifeLine “is a conditional subsidy the state is not obligated to provide, in a program wireless carriers are not obligated to join.”

The CPUC rule “could fall into the Pittencrieff universal service exception,” the state agency said. “However, since the record isn't developed on Pittencrieff, the court shouldn't “decide, as a matter of law, whether the Pittencrieff exception applies.”

"This case sits at the intersection of two regulatory regimes in the Communications Act,” noted the FCC brief. Section 254 lets states adopt regulations to preserve and advance universal services as long as they're consistent with FCC rules, it said. Section 332 prohibits states from regulating wireless rates, “while preserving state authority to regulate ‘other terms and conditions’ and to impose ‘requirements … on all providers of telecommunications services necessary to ensure the universal availability of telecommunications service at affordable rates.’”