WASHINGTON-The high-stakes legal battle over truth-in-billing regulation continued to play out last week in a federal appeals court, with a consumer group and Vermont regulators arguing the Federal Communications Commission’s justification for pre-empting state regulation of non-tax line items on bills is flawed and should not be given deference by the court.
The FCC last year said state rules either requiring or prohibiting line items on wireless bills amount to illegal rate regulation. That finding, part of a broader decision extending truth-in-billing guidelines to wireless carriers, is based on a 1993 law that has been at the heart of much consumer and health litigation the past decade. The 1993 law banned state oversight of wireless rates and market entry, but reserved to states other terms and conditions of wireless service.
From that law, the cellular industry has developed federal pre-emption arguments with mixed success. It worked when the 8th U.S. Circuit Court of Appeals late last year agreed with industry’s federal pre-emption claim and tossed out a Minnesota wireless consumer law that would have required wireless carriers to give consumers two months advance notice of service contract changes.
Now, having bested Minnesota Attorney General Mike Hatch in court, industry faces a leading consumer group and Vermont regulators in a different legal venue.
The National Association of State Utility Consumer Advocates and the Vermont Public Service Board challenged the FCC ruling. The truth-in-billing case is now before the 11th U.S. Circuit Court of Appeals in Atlanta, whose ultimate decision could impact a separate lawsuit. In that case, national cell-phone carriers asked a Kentucky federal judge to strike down a state law forbidding telecom carriers from passing on to consumers a 1.3-percent gross receipts tax.
Indeed, U.S. District Judge Karen Caldwell in December put the Kentucky lawsuit on hold pending a ruling in the 11th Circuit. Cingular Wireless L.L.C., Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA Inc. contend the Kentucky tax-signed into law last year by Gov. Ernie Fletcher-violates the 1993 prohibition against state regulation of wireless rates. The wireless carriers argue non-Kentucky cellular customers on national calling plans would have to absorb most of the cost of the state tax without gaining any benefit.
In its 11th Circuit brief last week, NASUCA said the court is not obligated to give special weight to a federal agency’s interpretation “that is bereft of any substantive analysis of Congress’ pre-emptive intent.”
“Agencies may not forego consideration of the tools of statutory interpretation in ascertaining the scope of pre-emption Congress intended,” stated NASUCA. “Yet this is precisely what the FCC did, skipping this analysis and instead simply equated regulatory `line items’ with `rate elements,’ based only on two prior agency statements taken from an entirely different regulatory context.”
NASUCA said that because the FCC’s effort to divine Congress’ pre-emptive intent regarding such state laws is ill-founded, the court does not owe deference to the agency’s wireless line-item pre-emption determination.
The FCC’s truth-in-billing ruling took a far different direction than that anticipated by NASUCA.
NASUCA wanted the FCC to ban regulatory recovery fees-charges levied by cellular operators to defray the cost of federal mandates such as local number portability, enhanced 911 and universal service. The consumer group said such charges are deceptive because they look much like mandated state and federal charges. Wireless carriers insist regulatory recovery fees help consumers see more precisely what they are paying for. Some critics say implementing federal mandates-for any industry-is a cost of doing business and their special assessments should not separately be broken out. Cellular companies responded that other businesses do just that, explaining that inclusion of regulatory recovery fees on bill is necessary to maintain national pricing for consumers.
NASUCA disagrees.
“The national, deregulatory framework for (commercial mobile radio services) rates and entry Congress intended simply is not synonymous with nationwide or regional pricing,” NASUCA told the court. “The notion [that] Congress sought nationwide pricing is simply inconsistent with the fact that Congress expressly allowed states to tax CMRS providers or impose other assessments on their service.”
While the FCC brought the wireless industry under the federal truth-in-billing regime and held wireless carriers are responsible for not misleading consumers by making regulatory recovery fees indistinguishable from taxes, the agency in fact this year began a process that could lead to a substantial rollback of state wireless authority.
In a sister proceeding last year, the FCC preliminarily determined inconsistent state regulation of telecom carrier-specific truth-in-billing regulations should be 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. The commission also 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 at the point of sale the full rate, including any non-mandated line items as well as an estimate of government-imposed surcharges.
Policy twists and turns aside, the legal battle comes down to how the 11th Circuit reads the 1993 law on federal pre-emption of state rate regulation and the regulatory scope of “other terms and conditions” of wireless service reserved to states.
“If Congress had intended to pre-empt state regulation or state taxing authority as broadly as the FCC claims, it would have said so explicitly,” the Vermont PSB said.
Vermont regulators added the legislative history “strongly indicates that Congress in 1993 did not intend its limited pre-emption of state ratemaking authority to grant the FCC authority to limit or regulate state taxes.”
Mobile-phone carriers have told the court NASUCA’s and the Vermont PSB’s interpretation of the 1993 law is overly narrow and contrary to Congress’ desire to create a nationwide seamless wireless telecommunications system.
The outcome of the pending lawsuits on the reach of the 1993 federal pre-emption law could influence whether the FCC also concludes that states cannot interfere with early termination fees imposed by mobile-phone carrier on subscribers who want out early of their service contracts.
