Wwc Holding Co., Inc. v. Sopkin

• Decision Date: 05 June 2007
• Docket Number: No. 06-1156.,06-1156.
• Citation: 488 F.3d 1262
• Parties: WWC HOLDING CO., INC., Plaintiff-Appellee, v. Gregory E. SOPKIN, Polly E. Page, Carl Miller, in their official capacities as the Commissioners of the Public Utilities Commission of the State of Colorado, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

488 F.3d 1262

WWC HOLDING CO., INC., Plaintiff-Appellee, v. Gregory E. SOPKIN, Polly E. Page, Carl Miller, in their official capacities as the Commissioners of the Public Utilities Commission of the State of Colorado, Defendants-Appellants.

No. 06-1156.

United States Court of Appeals, Tenth Circuit.

June 5, 2007.

Paul C. Gomez, First Assistant Attorney General, Denver, CO, (John W. Suthers, Colorado Attorney General, with him on the briefs), for Defendants-Appellants.

Phillip R. Schenkenberg, Briggs and Morgan, P.A., Minneapolis, MN, for Plaintiff-Appellee.

Before BRISCOE, EBEL, and GORSUCH, Circuit Judges.

EBEL, Circuit Judge.

This case involves the question of whether and how the federal Telecommunications Act restricts a state's authority to impose conditions on wireless service providers seeking to be designated as an "eligible telecommunications carrier" ("ETC") under Section 214(e)(2) of the Act when those conditions would affect the interstate components of a carrier's services. The commissioners of the Public Utilities Commission ("PUC") of Colorado appeal a district court decision that enjoined the PUC from imposing "consumer protection" conditions on WWC Holding Company ("Western Wireless") as part of Western Wireless's request to be designated an ETC. The district court found that the PUC's proposed conditions constituted interstate regulation, and concluded that the Telecommunications Act prohibited the PUC from engaging in such regulation. WWC Holding Co. v. Sopkin, 420 F.Supp.2d 1186 (D.Colo.2006). The district court also decided that the Telecommunications Act requires the PUC to engage in a rule-making for any conditions that the PUC decides to impose on a carrier seeking ETC designation.

We conclude that the district court erred in both regards. We hold that the Telecommunications Act does not prevent the PUC from exercising its express statutory authority under Section 214(e) of the Act in a way that affects the interstate components of services offered by carriers who are otherwise subject to the PUC's jurisdiction. We also conclude that Section 214(e) governs ETC designations and does not require state commissions to issue rules and regulations regarding the conditions that are imposed on a carrier seeking ETC designation. We reverse those two holdings by the district court, and remand for further consideration of the other issues raised in this case.

I. BACKGROUND

The Telecommunications Act of 1996 significantly changed the federal approach to ensuring that the nation's population has access to "universal service." "Universal service" includes the principles of: quality telecommunications service at "just, reasonable, and affordable rates;" service availability in all regions of the country; and services and rates in rural and high-cost areas that are comparable to other areas. 47 U.S.C. § 254(b).

To develop the services and infrastructure to meet these goals, Congress created a federal fund to which telecommunications carriers contribute, 47 U.S.C. § 254(d), often through fees passed on to customers. This funding is distributed as public subsidies to telecommunications carriers who apply for and receive designation as ETCs. 47 U.S.C. § 214(e). ETCs are eligible to receive the subsidy by committing to offering the "universal services" prescribed by the Federal Communications Commission ("FCC") in the specified service area. Id. The FCC is responsible for processing requests for ETC designation when the telecommunications carrier is not subject to the jurisdiction of a state public utility commission. 47 U.S.C. § 214(e)(6). However, when a carrier wishes to obtain ETC designation for an area within a state, it is the state public utility commission rather than the FCC that is charged with making those designations. 47 U.S.C. § 214(e)(2). The Act instructs that "[b]efore designating an additional eligible telecommunications carrier for an area served by a rural telephone company, the State commission shall find that the designation is in the public interest." Id.

States also have the option of creating their own universal service program under Section 254(f) of the Telecommunications Act. Colorado has done so through a state funding mechanism, and distributes state subsidies for universal service by designating carriers as "eligible providers."

Western Wireless provides mobile phone services. In 2003, Western Wireless applied to the PUC to receive federal subsidies through an ETC designation for specified areas in Colorado that were already served by a rural telephone company. Western Wireless did not seek state subsidies through an eligible provider designation. After a hearing, the PUC decided to grant the application for ETC designation under Section 214(e) of the Telecommunications Act, but found that the designation would be in the "public interest" only if Western Wireless complied with state-specific consumer protection and operational standards.¹ In a petition for reconsideration, Western Wireless informed the PUC that it was willing to adhere to the same consumer protection conditions that the FCC imposed on ETC designations within its purview,² but argued that the PUC's state-level conditions were designed for traditional wireline carriers and were inappropriate for a mobile telecommunications carrier.³

After the PUC denied the petition for reconsideration, Western Wireless brought suit in federal district court seeking to enjoin these conditions of its ETC designation. The court granted Western Wireless summary judgment, holding that the PUC's proposed conditions amounted to "unlawful regulation" of an "interstate carrier" because Western Wireless "bundles intrastate and interstate services together in service packages which do not distinguish between or separately bill for interstate and intrastate calls." WWC Holding Co., 420 F.Supp.2d at 1190, 1196. The court also found that because Section 254(f) provides that a state universal service program "may adopt regulations not inconsistent with the [FCC's] rules to preserve and advance universal service," the conditions imposed by the PUC on carriers seeking universal service subsidies under an ETC designation must be promulgated through regulations. The court concluded that because the PUC had not adopted regulations that set forth the quality of service standards at issue, such standards could not be imposed on Western Wireless as a condition of ETC designation. Id. at 1195-96. The PUC appealed those conclusions.

II. DISCUSSION

A. Jurisdiction and Standard of Review

The district court has authority under 28 U.S.C. § 1331 to review a state public utility commission's orders under the Telecommunications Act for compliance with federal law. Verizon Md., Inc. v. Pub. Serv. Comm'n, 535 U.S. 635, 642, 122 S.Ct. 1753, 152 L.Ed.2d 871 (2002). We have jurisdiction to hear this appeal from the district court's final decision. 28 U.S.C. § 1291.⁴

We apply a de novo standard of review when reviewing state commissions' interpretations of the Telecommunications Act and its regulations, as those decisions turn on determinations of federal law. Sw. Bell Tel. Co. v. Apple, 309 F.3d 713, 717 (10th Cir.2002); Sw. Bell Tel. Co. v. Brooks Fiber Commc'ns of Okla., Inc., 235 F.3d 493, 498 (10th Cir.2000). "Once federal courts determine that state commissions properly interpreted the Act and its regulations, courts apply an arbitrary and capricious standard to review the remaining state commissions' determinations." Apple, 309 F.3d at 717. Because today's decision addresses only the interpretation of the Telecommunications Act and federal law, our review is de novo.

B. State Authorities and Interstate Communications⁵

The concept of a clean divide between interstate and intrastate jurisdiction in the world of telecommunications regulation has long been considered anachronistic, even before the advent of mobile telecommunications. As the Supreme Court has observed,

while the [Communications] 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."

La. Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 360, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986). In Louisiana Public Service Commission, the Court rejected the suggestion that the FCC's jurisdiction preempted state action whenever the state action impacted assets used for both interstate and intrastate communication. Id. at 374-75, 106 S.Ct. 1890.

The revisions to the Telecommunications Act enacted in 1993 and 1996 continued to reflect this uneasy jurisdictional allocation between states and the federal government. The Act provides that the FCC has no jurisdiction over intrastate communication services, generally leaving the regulation of such services to the states. 47 U.S.C. § 152(b). However, "Congress, by extending the Communications Act into local competition, has removed a significant area from the States' exclusive control." AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 381 n. 8, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999). The Supreme Court views the 1996 Act as reserving to states their authority to regulate intrastate communications "[i]nsofar as Congress...