WASHINGTON-The Federal Communications Commission and cellular carriers urged a federal appeals court to throw out challenges to an agency ruling that forbids states from regulating line-item charges on monthly mobile-phone bills.
The litigation has turned into a major legal test of the reach of a 1993 federal law pre-empting states from regulating mobile-phone rates and market entry, while reserving to states jurisdiction over other terms and conditions of wireless service.
Indeed, a federal judge in Kentucky last month suspended enforcement of a new law prohibiting telecom operators from passing through to subscribers a 1.3-percent gross receipts tax until the 11th U.S. Circuit Court of Appeals in Atlanta rules on federal pre-emption issues raised by the National Association of State Utility Consumer Advocates and the Vermont Public Service Board.
“The FCC correctly determined that state regulations that either prohibit or require line items constitute regulation of rates charged” under the 1993 law, stated Cingular Wireless L.L.C., Verizon Wireless, Sprint Nextel Corp., T-Mobile USA Inc. and Leap Wireless International Inc.
NASUCA asked the FCC to prohibit regulatory recovery fees, which are separate charges on wireless bills intended to recover the carriers’ cost of implementing federal mandates such as enhanced 911, local number portability and universal-service-fund contributions. The commission refused to ban regulatory recovery fees as long as they do not mislead consumers.
“Line items in particular, just like any other part of a bill for CMRS [commercial mobile radio services], are rates charged to consumers by CMRS providers-they are merely listed separately, rather than being combined with some other amount,” operators told the 11th Circuit. They said line items enable them to maintain uniform national pricing plans, which have become the norm in the wireless industry.
The wireless firms said NASUCA’s and the Vermont PSB’s interpretation of the 1993 law is unjustifiably narrow and “contrary to the statute’s text and fundamental purpose of eliminating state regulatory barriers to the creation of a seamless, nationwide wireless telecommunications system, as well as long-standing agency precedent construing the statute.”
While pre-empting state oversight of wireless line-items in its March 2005 decision, the FCC extended truth-in-billing regulations to cellular carriers. The wireless industry fought to avoid inclusion in the truth-in-billing regulatory regime.
The FCC said it did not err in preventing states from dictating how carriers should present monthly bills to consumers.
“On the merits, the FCC reasonably construed the pre-emption of state rate regulation set forth [in the 1993 law] to prevent states from requiring or forbidding line items on CMRS bills,” the FCC stated. “When the [1993 law] was adopted, rate regulation was generally understood to include [among other things] the regulation of rate structures and rate elements. A line item in a CMRS bill is an element of the CMRS rate, and requiring or prohibiting that element directly affects the manner in which the carrier sets rates for CMRS service.”
NASUCA and the Vermont PSB are set to file briefs with the 11th Circuit next week. No date has been set for oral argument.
Meantime, the FCC may be close to ruling on other wireless truth-in-billing issues still pending before the agency.
The FCC last year tentatively concluded non-tax line items must be located in a section of a wireless bill separate from government-imposed charges and that carriers must disclose to consumers the full rate-including any non-mandated line items as well as an estimate of government-imposed surcharges. The agency also preliminarily determined that state-based truth-in-billing regulations inconsistent with federal guidelines are pre-empted. At the same time, the FCC said future pre-emption would not limit the ability of states to enforce their own consumer-protection laws.
Slowly but surely the wireless industry is gaining legal ground on federal pre-emption against states.
In December, the 8th Circuit agreed with wireless industry lawyers to throw out Minnesota’s wireless consumer-protection law. The court said Minnesota’s law requiring cellular carriers to give subscribers 60 days written notice of proposed contract changes is pre-empted by federal statute.
The California Public Utilities Commission is weeks away from gutting a 2004 rule that included scores of new state wireless regulations in a bill of rights for telecom consumers.
Meantime, trade association CTIA is fighting at the FCC to convince regulators to declare that states are pre-empted from regulating early-termination fees. ETFs are charges imposed on subscribers who break service contracts. Specifically, CTIA wants the FCC to conclude that early-termination fees fall within `rates charged’ under the 1993 law.
