Metropcs Cal., LLC v. Picker
| Citation | 970 F.3d 1106 |
| Decision Date | 14 August 2020 |
| Docket Number | No. 18-17382,18-17382 |
| Parties | METROPCS CALIFORNIA, LLC, Plaintiff-Appellee, v. Michael PICKER; Martha Guzman Aceves; Carla Peterman; Liane Randolph; Clifford Rechtschaffen, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Enrique Gallardo (argued), Arocles Aguilar, and Helen M. Mickiewicz, California Public Utilities Commission, San Francisco, California, for Defendants-Appellants.
Peter Karanjia (argued) and Joy G. Kim, DLA Piper LLP (US), Washington, D.C.; Martin L. Fineman and Geoffrey S. Brounell, Davis Wright Tremaine LLP, San Francisco, California; for Plaintiff-Appellee.
Niyati Shah, Asian Americans Advancing Justice | AAJC, Washington, D.C.; Jeffrey S. Raskin and Pejman Moshfegh, Morgan Lewis & Bockius LLP, San Francisco, California; for Amici Curiae Asian Americans Advancing Justice | AAJC, and Multicultural Media, Telecom and Internet Council.
Before: Richard A. Paez, Carlos T. Bea, and Michelle T. Friedland, Circuit Judges.
MetroPCS California, LLC ("MetroPCS"), a wholly owned subsidiary of T-Mobile USA, Inc. ("T-Mobile"), sells prepaid cell phone plans in California and other states. Like other telecommunications providers, MetroPCS remits a portion of its revenue to federal and state governments to fund universal service programs. This appeal raises the question whether federal law preempts California law governing universal service contributions from MetroPCS and other prepaid wireless providers.
Federal law requires telecommunications providers, including wireless providers such as MetroPCS, to contribute to the federal Universal Service Fund, which helps provide affordable telecommunications access. These contribution requirements are imposed on revenues the providers derive from their customers’ interstate telecommunications. See 47 U.S.C. § 254(d). The Federal Communications Commission ("FCC") has authorized three methods that wireless providers can use to distinguish between interstate and intrastate revenues. Federal law also permits states to require telecommunications providers to contribute to state universal service programs based on the providers’ intrastate revenues. See id. § 254(f).
California requires its own universal service contributions. It imposes surcharges on consumers’ use of intrastate telecommunications services and relies on providers to collect those surcharges from their customers. In 2014, California adopted the Prepaid Mobile Telephony Services Surcharge Collection Act ("Prepaid Act"), which (prior to its recent expiration) governed the collection of surcharges from prepaid wireless customers. The California Public Utilities Commission ("CPUC") issued resolutions implementing the Prepaid Act that required providers of prepaid services to use a method other than the three FCC-recognized methods to determine the revenues generated by intrastate traffic that were subject to surcharge. Specifically, the CPUC resolutions required all prepaid providers to apply a uniform, flat-rate "intrastate allocation factor" to determine their intrastate revenues. Providers of postpaid services, by contrast, were not governed by the resolutions and were free to use any of the three FCC-recognized methods to determine their intrastate revenues for purposes of calculating surcharges owed to the CPUC.
MetroPCS filed this lawsuit alleging that the CPUC resolutions were preempted by federal law. Among other things, MetroPCS contended that the resolutions’ requirement of an intrastate allocation factor increased surcharges on prepaid services—but not on competing postpaid services—and thereby placed MetroPCS at a disadvantage in the wireless telecommunications market, in conflict with the federal Telecommunications Act of 1996 ("Telecommunications Act") and FCC decisions implementing it. The district court ruled for MetroPCS, and the CPUC appealed. While this appeal was pending, the Prepaid Act expired.
As a threshold matter, we hold that the expiration of the Prepaid Act did not cause this case to become moot and that we therefore have jurisdiction to reach the merits of MetroPCS's preemption claim. With respect to that claim, we hold that the CPUC resolutions are not facially preempted by the Telecommunications Act and related FCC decisions, and we therefore reverse the district court's ruling in favor of MetroPCS. We remand to the district court to consider in the first instance MetroPCS's other challenges to the resolutions.
The universal availability of critical telecommunications services is "a fundamental goal of federal telecommunications regulation." Rural Cellular Ass'n v. FCC , 588 F.3d 1095, 1098 (D.C. Cir. 2009). From its inception, the FCC has been charged with "mak[ing] available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide ... communication service with adequate facilities at reasonable charges." Communications Act of 1934, Pub. L. No. 73-416, § 1, 48 Stat. 1064, 1064. States have also historically "exercised their jurisdictional authority to ensure the availability of universal service." In re Federal-State Joint Board on Universal Service , 13 FCC Rcd. 24744, 24747 (1998) (" 1998 Universal Service Decision ").
The Telecommunications Act solidified the commitment by the FCC and states to "ensuring the preservation and advancement of universal service." Id. at 24747–48 ; see also Pub. L. No. 104-104, § 101, 110 Stat. 56, 71–75 (1996). Under the Telecommunications Act, "[e]very telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the [FCC] to preserve and advance universal service." 47 U.S.C. § 254(d). The Act further provides that states "may adopt regulations not inconsistent with the [FCC]’s rules [that] preserve and advance universal service." Id. § 254(f). In states adopting universal service regulations, "[e]very telecommunications carrier that provides intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, in a manner determined by the State to the preservation and advancement of universal service in that State." Id.
The FCC has exercised its authority to establish guiding principles "for the preservation and advancement of universal service," id. § 254(b), by requiring that federal and state contributions be imposed on a competitively neutral basis. In re Federal-State Joint Board on Universal Service , 12 FCC Rcd. 8776, 8801 (1997) (" 1997 Universal Service Order "). The competitive neutrality policy is related to the statutory requirement that federal and state universal service contributions be "equitable and nondiscriminatory." Id. ; see also 47 U.S.C. § 254(d), (f). It requires that universal service "rules neither unfairly advantage nor disadvantage one provider over another, and neither unfairly favor nor disfavor one technology over another." 1997 Universal Service Order , 12 FCC Rcd. at 8801.
To implement the Telecommunications Act's dual regulatory scheme, the FCC funds federal universal service programs by imposing a contribution requirement on the portion of telecommunications providers’ revenues that is generated by interstate traffic, while states such as California support their own universal service programs through surcharges on the portion of revenues generated by intrastate traffic.1
The federal Universal Service Fund supports, among other things, the extension of high-speed internet to rural areas and the provision of discounted phone services to lowincome consumers. See Universal Service , FCC, https://www.fcc.gov/general/universal-service (last visited Aug. 4, 2020). Telecommunications providers’ contributions to the Universal Service Fund "are calculated by applying a quarterly ‘contribution factor’ " to the portion of their surchargeable2 telecommunications revenues that is interstate. See Rural Cellular Ass'n , 588 F.3d at 1099.
"For companies connecting landline customers, determining the percentage of interstate ... calls is relatively simple." Vonage Holdings Corp. v. FCC , 489 F.3d 1232, 1236–37 (D.C. Cir. 2007). But for providers of wireless and interconnected Voice over Internet Protocol ("VoIP") services3 —"whose customers may use their services from many locations and often have area codes that do not correspond to their true location[s]"—it can be more difficult to determine the percentage of interstate traffic. Id. at 1237. The FCC has therefore authorized three options for wireless and interconnected VoIP providers to separate the revenues they generate from interstate traffic from the revenues they generate from intrastate traffic.
First, if wireless and interconnected VoIP providers have "actual revenue data" showing the portion derived from interstate telecommunications, they may rely on that data. In re Universal Service Contribution Methodology , 21 FCC Rcd. 7518, 7535, 7544 (2006) (" 2006 Universal Service Order "). Second, providers may conduct a traffic study in which they take a sample of traffic on their network to estimate the percentage of all traffic that is interstate. See id. Finally, providers may rely on the FCC's "safe harbor," a percentage that is intended to "reasonably approximate the percentage of interstate ... telecommunications revenues." See In re Federal-State Joint Board on Universal Service , 13 FCC Rcd. 21252, 21253 (1998) ; see also 2006 Universal Service Order , 21 FCC Rcd. at 7532, 7544. Under the wireless safe harbor of 37.1% that has been in effect since 2006, for instance, a wireless provider can report that 37.1% of its surchargeable revenue is interstate without looking at an actual breakdown of its revenue or using a traffic study to approximate the breakdown. See 2006 Universal Service Order ,...
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