Posted By: Adrian Herbst, Partner, The Baller Herbst Law Group, P.C.
A recent decision by the Ninth Circuit Court of Appeals — with importance throughout the nation — favorably affects the scope and limits of local powers relating to management of local rights‑of‑way and compensation for their use by communications service providers. Sprint Telephony PCS v. County of San Diego, 2008 WL 4166657 (9th Cir. 2008)(“County of San Diego”).
We have prepared this memorandum to assist communities who may potentially be affected by this holding, and we urge you to consider how and whether the Ninth Circuit case may provide opportunities to improve existing processes and requirements governing rights‑of‑way use and to franchising, tower siting, and matters relating to the regulation of telecommunications facilities generally.
A. Section 253
Section 253 of the federal Telecommunications Act of 1996, 47 U.S.C. § 253, entitled “Removal of Barriers to Entry,” is an oft-litigated statute. Three sections are relevant for present purposes: a prohibition against barriers to entry in section 253(a); a preservation of certain state government rights, in section 253(b); and, in section 253(c), a “savings clause” permitting state and local governments to manage the public rights-of-way and require compensation for their use, notwithstanding the prohibition against barriers to entry in section 253(a):
(a) In general
No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.
B. Previously Expansive Interpretation of 253(a)’s Preemptive Effect: City of Auburn
In 2001, the Ninth Circuit Court of Appeals was one of the first courts in the nation to consider the scope of the barrier-to-entry provision of section 253(a), in City of Auburn v. Qwest Corp., 260 F.3d 1160 (9th Cir.2001). Its expansive interpretation of section 253(a) caused problems for local governments nationwide, and was heavily criticized on policy and legalistic grounds. The Ninth Circuit’s recent decision in County of San Diego includes the following explanation:
Again, § 253(a) states: “No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.” In Auburn, we became one of the first federal circuit courts to interpret that provision. We surveyed district court decisions and adopted their broad interpretation of its preemptive effect. Auburn, 260 F.3d at 1175-76. In the course of doing so, we quoted § 253(a) somewhat inaccurately, inserting an ellipsis in the text of § 253(a). Id. at 1175. We held that “[s]ection 253(a) preempts ‘regulations that not only “prohibit” outright the ability of any entity to provide telecommunications services, but also those that “may … have the effect of prohibiting” the provision of such services.’” Applying that broad standard, we held that the municipal regulations at issue in Auburn were preempted because they imposed procedural requirements, charged fees, authorized civil and criminal penalties, and-“the ultimate cudgel”-reserved discretion to the city to grant, deny, or revoke the telecommunications franchises.
The court went on to note the various criticisms of its City of Auburn holding, and to explicitly renounce its prior rationale:
Recently, the Eighth Circuit rejected the Auburn standard and held that, to demonstrate preemption, a plaintiff “must show actual or effective prohibition, rather than the mere possibility of prohibition.” Level 3 Commc’ns, L.L.C. v. City of St. Louis, 477 F.3d 528, 532-33 (8th Cir.2007); see also AT & T Commc’ns of Pac. Nw., Inc. v. City of Eugene, 177 Or.App. 379, 35 P.3d 1029, 1047-48 (2001) (implicitly rejecting the Auburn standard).
We find persuasive the Eighth Circuit’s and district courts’ critique of Auburn. Our previous interpretation of the word “may” as meaning “might possibly” is incorrect. We therefore overrule Auburn and join the Eighth Circuit in holding that “a plaintiff suing a municipality under section 253(a) must show actual or effective prohibition, rather than the mere possibility of prohibition.” (emphasis added)
II. POTENTIAL IMPACT AND RECOMMENDATION
The upshot of the County of San Diego case is that local governments are much less likely to face opposition from telecommunications, cable and tower companies against local regulations managing the public rights-of-way. Whereas in the past, under City of Auburn¸ such companies may have succeeded in challenging a local permit or right-of-way management ordinance on the basis that it “may” have the effect of prohibiting the provision of a communications service, they now “must show actual or effective prohibition, rather than the mere possibility” of it.
In short, local governments who recently or currently are engaged in franchise negotiations with cable, telecommunications and/or tower companies now may more effectively justify or defend proposed regulations or processes against challenges grounded in section 253(a). We suggest that affected government entities further evaluate their current franchise and/or right-of-way management ordinances, and, in particular, the state of any in-process negotiations, to ensure that the locality takes full advantage of this beneficial development.