Louisiana Public Service Commission v. Federal Communications Commission California v. Federal Communications Commission Public Utilities Commission of Ohio v. Federal Communications Commission Florida Public Service Commission v. Federal Communications Commission, Nos. 84-871

CourtUnited States Supreme Court
Writing for the CourtBRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, REHNQUIST, and STEVENS, JJ., joined. BURGER, C.J., and BLACKMUN
Citation106 S.Ct. 1890,90 L.Ed.2d 369,476 U.S. 355
PartiesLOUISIANA PUBLIC SERVICE COMMISSION, Appellant, v. FEDERAL COMMUNICATIONS COMMISSION et al. CALIFORNIA and Public Utilities Commission of California, et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States. PUBLIC UTILITIES COMMISSION OF OHIO, et al., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION et al. FLORIDA PUBLIC SERVICE COMMISSION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION et al
Decision Date27 May 1986
Docket Number84-1054 and 84-1069,84-889,Nos. 84-871

476 U.S. 355
106 S.Ct. 1890
90 L.Ed.2d 369
LOUISIANA PUBLIC SERVICE COMMISSION, Appellant,

v.

FEDERAL COMMUNICATIONS COMMISSION et al. CALIFORNIA and Public Utilities Commission of California, et al., Petitioners, v. FEDERAL COMMUNICATIONS COMMISSION and United States. PUBLIC UTILITIES COMMISSION OF OHIO, et al., Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION et al. FLORIDA PUBLIC SERVICE COMMISSION, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION et al.

Nos. 84-871, 84-889, 84-1054 and 84-1069.
Argued Jan. 13, 1986.
Decided May 27, 1986.
Syllabus

The Communications Act of 1934 (Act) grants to the Federal Communications Commission (FCC) broad authority to develop and regulate "interstate and foreign commerce in wire and radio communication," 47 U.S.C. § 151, but also provides that "nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service," § 152(b). In 1980 and 1981, the FCC issued orders changing its prior rules concerning practices for depreciating telephone plant and equipment. Subsequently, upon the petition of private telephone companies, the FCC ruled that § 220 of the Act, which expressly directs the FCC to prescribe depreciation practices, operated to pre-empt inconsistent state depreciation regulations for intrastate ratemaking purposes, and that, as an alternative ground, federal displacement of state regulation was justified as being necessary to avoid frustration of validly adopted federal policies. The Court of Appeals affirmed.

Held: Section 152(b) bars federal pre-emption of state regulation over depreciation of dual jurisdiction property for intrastate ratemaking purposes. Pp. 368-379.

(a) Sections 151 and 152(b) are naturally reconciled to define a national goal of the creation of a rapid and efficient telephone service, and to enact a dual regulatory system to achieve that goal. P. 370.

(b) Neither the legislative history of § 152(b) nor the Act's structure supports the view that the words "charges," "classifications," and "practices," as used in § 152(b), were intended to refer only to "customer charges" for specific services and not to depreciation charges. Those words are terms of art that are to be interpreted by reference to the

Page 356

trade to which they apply, and thus they embrace depreciation. Pp. 371-373.

(c) There is no merit to the argument that § 152(b) does not control because the plant involved is used interchangeably to provide both interstate and intrastate service, and that § 152(b)'s reservation of authority to state commissions should be confined to intrastate matters that do not substantially affect interstate communication. Although state regulation will generally be displaced to the extent that it stands as an obstacle to the accomplishment of the full purposes and objectives of Congress, a federal agency may pre-empt state law only when and if it is acting within the scope of its congressionally delegated authority. Here, § 152(b) constitutes a congressional denial of power to the FCC to require state commissions to follow FCC depreciation practices for intrastate ratemaking purposes, and the FCC may not take "pre-emptive" action merely because it thinks such action will best effectuate federal policy. Moreover, the Act itself establishes a process designed to resolve "jurisdictional separations" matters, by which process it may be determined what portion of an asset is employed to produce or deliver interstate as opposed to intrastate service, 47 U.S.C. § 410(c). Thus it is possible to apply different rates and methods of depreciation to plant once the correct allocation between interstate and intrastate use has been made. Pp. 373-376.

(d) Nor is there merit to the argument that § 220, which directs the FCC to prescribe the classes of property for which depreciation charges may be included under operating expenses in fixing rates, and which prohibits carriers from departing from FCC-set regulations respecting depreciation, requires automatic pre-emption of all state regulation respecting depreciation. The meaning of § 220 is not so unambiguous or straightforward as to override § 152(b)'s command that "nothing in this chapter shall be construed to apply or to give the Commission jurisdiction" over intrastate service. Pp. 376-378.

737 F.2d 388 (CA4 1984), reversed and remanded.

BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, REHNQUIST, and STEVENS, JJ., joined. BURGER, C.J., and BLACKMUN, J., dissented. POWELL and O'CONNOR, JJ., took no part in the consideration or decision of the cases.

Lawrence G. Malone, Albany, N.Y., for appellant and petitioners.

Page 357

Sol. Gen. Charles Fried, for federal appellees and respondents.

Michael Boudine, for respondents AT & T and former Bell System Operating Companies.

[Amicus Curiae Information from page 357-358 intentionally omitted]

Page 358

Justice BRENNAN delivered the opinion of the Court.

In these consolidated cases, we are asked by 26 private telephone companies and the United States to sustain the holding of the Court of Appeals for the Fourth Circuit that orders of the Federal Communications Commission (FCC or Commission) respecting the depreciation of telephone plant and equipment pre-empt inconsistent state regulation. They are opposed by the Public Service Commissions of 23 States, backed by 30 amici curiae, who argue that the Communications Act of 1934 (Act), 48 Stat. 1064, as amended, 47 U.S.C. § 151 et seq., expressly denied the FCC authority to establish depreciation practices and charges insofar as they relate to the setting of rates for intrastate telephone service.

Respondents suggest that the heart of the cases is whether the revolution in telecommunications occasioned by the federal policy of increasing competition in the industry will be thwarted by state regulators who have yet to recognize or

Page 359

accept this national policy and who thus refuse to permit telephone companies to employ accurate accounting methods designed to reflect, in part, the effects of competition. We are told that already there may be as much as $26 billion worth of "reserve deficiencies" on the books of the Nation's local telephone companies, a reserve which, it is insisted, represents inadequate depreciation of a magnitude that threatens the financial ability of the industry to achieve the technological progress and provide the quality of service that the Act was passed to promote. Petitioners answer that the Act clearly establishes a system of dual state and federal authority over telephone service. They contend that the Act vests in the States exclusive power over intrastate rate making, which power, petitioners argue, includes final authority over how depreciation shall be calculated for the purpose of setting those intrastate rates. Petitioners note also that the Due Process Clause of the Fourteenth Amendment necessarily represents a check on the power of the States to set depreciation rates at what would amount to confiscatory levels, and that respondents therefore overstate the danger of the States crippling the financial vitality of phone companies.

In deciding these cases, it goes without saying that we do not assess the wisdom of the asserted federal policy of encouraging competition within the telecommunications industry. Nor do we consider whether the FCC should have the authority to enforce, as it sees fit, practices which it believes would best effectuate this purpose. Important as these issues may be, our task is simply to determine where Congress has placed the responsibility for prescribing depreciation methods to be used by state commissions in setting rates for intrastate telephone service. In our view, the language, structure, and legislative history of the Act best support petitioners' position that the Act denies the FCC the power to dictate to the States as it has in these cases, and accordingly, we reverse.

Page 360

I

The Act establishes, among other things, a system of dual state and federal regulation over telephone service, and it is the nature of that division of authority that these cases are about. In broad terms, the Act grants to the FCC the authority to regulate "interstate and foreign commerce in wire and radio communication," 47 U.S.C. § 151, while expressly denying that agency "jurisdiction with respect to . . . intrastate communication service. . . ." 47 U.S.C. § 152(b). However, while the Act would seem to divide the world of domestic telephone service neatly into two hemispheres—one comprised of interstate service, over which the FCC would have plenary authority, and the other made up of intrastate service, over which the States would retain exclusive jurisdiction—in practice, the realities of technology and economics belie such a clean parceling of responsibility. This is so because virtually all telephone plant that is used to provide intrastate service is also used to provide interstate service, and is thus conceivably within the jurisdiction of both state and federal authorities. Moreover, because the same carriers provide both interstate and intrastate service, actions taken by federal and state regulators within their respective domains necessarily affect the general financial health of those carriers, and hence their ability to provide service, in the other "hemisphere."

In 1980 and 1981, the FCC issued two orders that ultimately sparked this litigation. In the 1980 order the FCC changed two depreciation practices affecting telephone plant. Property Depreciation, 83 F.C.C.2d 267, reconsideration denied, 87 F.C.C.2d 916 (1981). First, the order altered how carriers could group property subject to depreciation. Because carriers employ so many individual items of equipment in providing service, it would be...

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