No ‘Material Facts’ Show Santa Fe’s Fee Hurt NMSurf’s Business: City

Wireless ISP NMSurf, in its appeal of the district court’s upholding of Santa Fe’s 2% revenue-based franchise fee, didn’t identify any legal error by the district court that would warrant the appellate court to reverse it, argued the city in its response brief Friday (docket 22-2131) in the 10th U.S. Circuit Court of Appeals.

NMSurf’s argument is that Santa Fe’s ordinance fee isn’t based on the city’s cost of operating the public rights of way for service providers but rather is “an old-style revenue producer” that’s preempted by sections 253 and 332 of the Telecommunications Act (see 2301180018). It has the backing of CTIA and USTelecom, which argued in a Jan. 27 amicus brief that the 10th Circuit’s decision has the potential to affect the fees local jurisdictions are able to charge communications providers throughout the U.S. to do business (see 2301300001).

NMSurf wrongly is asking the 10th Circuit “to overrule precedent and to adopt a new rule” interpreting Section 253, said Santa Fe’s response brief. “Unfortunately for NMSurf, it provides inadequate reasons to overrule the 10th Circuit’s precedent,” it said. There has been no change in Supreme Court precedent interpreting Section 253, nor has an en banc panel of the 10th Circuit “reconsidered its approach” to the statute, said the city.

The U.S. District Court for New Mexico "correctly decided" Santa Fe's telecommunications ordinance "neither prohibits nor has the effect of prohibiting telecommunications services" in violation of Section 253, said the city. NMSurf notes the 10th Circuit's jurisprudence on Section 253 said "a state or local government's restriction on telecommunications need not pose an absolute or insurmountable barrier on a telecommunications provider,” it said. But the record demonstrates the city's ordinance “poses no barrier to the provision of telecommunications services” for NMSurf, it said.

Under the 10th Circuit’s 2004 decision in Qwest v. Santa Fe, the “test” for deciding whether Section 253 preempts a local ordinance is “burden-shifting,” said the city. A plaintiff must first show an ordinance actually and effectively “prohibits the provision of telecommunication service” under Section 253, it said. The prohibition can’t be “speculative,” it said. “Only if that burden is carried does it then fall on the local government to prove” its ordinance falls within Section 253's “carve-out,” it said. NMSurf’s case “fails to meet” this test, the city said. NMSurf offered “no material facts” before the district court showing Santa Fe’s fee “prohibits or even impacts its business,” said the city. The ISP, for example, “identified no projects or plans” that Santa Fe’s ordinance has prohibited, it said.

NMSurf’s responses to Santa Fe’s interrogatories during discovery made clear the company “offered no specific information” on how the ordinance prohibited NMSurf from providing telecom services, said the city. In an excerpted answer to one such interrogatory as quoted in the brief, NMSurf told the interrogator it received approval for specific projects applied for under the ordinance after it received the franchise in 2018. But the company added that the interrogatory “is irrelevant to the effective prohibition standard as interpreted by the 10th Circuit and the FCC.”

As the district court “correctly found,” NMSurf “offered no material facts showing that the fee actually prohibits its business,” said the city. To avoid that “inconvenient truth,” NMSurf attempted to persuade the district court and now the 10th Circuit to adopt a new rule derived from the FCC rulemaking in order 18-133, “knowing it does not readily apply to the case at bar,” it said. NMSurf “must concede” that the purpose of the rulemaking, “as the FCC itself stated, was to address wireless deployment, not wireline or fiber deployment,” it said.

NMSurf nevertheless is asking the 10th Circuit to adopt a new rule, originally intended by the FCC to apply to wireless deployments, “to be applied to the case at bar,” said the city. It’s doing so because under the 10th Circuit’s existing precedent of this Circuit, NMSurf “cannot prevail,” it said. The ISP hasn’t shown “any actual or effective prohibition of telecommunications services” by Santa Fe, it said. “Only by adopting a completely new test for a different type of technology to address a different problem” could NMSurf “hope to prevail,” it said.