MetroPCS Seeks Summary Judgment in CPUC Litigation

The California Public Utilities Commission unlawfully treated two-thirds of MetroPCS revenue as intrastate, the T-Mobile subsidiary claimed Tuesday at the U.S. District Court in San Francisco (case 3:17-cv-05959-JD). The company said it will move for summary judgment at an April 27 hearing.

MetroPCS sued the CPUC in 2017 to challenge California assessing USF payments for prepaid phone service. MetroPCS said the 2014 California Prepaid Act and related CPUC resolutions imposing USF surcharges on prepaid wireless are unlawful and preempted. The CPUC is doing a related enforcement case (see 2303200057).

The CPUC resolutions are preempted by federal law because they assess a surcharge on MetroPCS revenue from interstate broadband and other nonsurchargeable service in violation of the 1934 Communications Act and FCC order, wrote MetroPCS: The CPUC may impose state USF surcharges on intrastate services but not data, text messaging or interstate voice. Also, the resolutions violate federal requirements for competitive neutrality by subjecting a prepaid wireless carrier to a much higher surcharge than a postpaid carrier would pay, it said.

The CPUC forced prepaid carriers to use the agency’s method for determining intrastate revenue allocations starting in 2017. “Contrary to both common sense and marketplace realities, this intrastate factor deemed more than two-thirds of revenues (72.75% in 2017 and 69.45% in 2018) from prepaid wireless plans to be attributable solely to intrastate telecommunications service,” MetroPCS said.

But according to MetroPCS' own revenue-allocation methods, which were based on generally accepted accounting principles, the company received 75% of 2017 revenue from nonsurchargeable broadband and less than 18% from intrastate voice, it said. As a result, through the CPUC method, the agency unlawfully imposed $49.1 million in surcharges on MetroPCS in 2017 and $63 million in 2018, the T-Mobile subsidiary said.

The commission didn't force the same formula on postpaid carriers, said MetroPCS. “This is a paradigmatic competitive-neutrality violation because the increased surcharge burden makes it much more difficult for MetroPCS to compete with postpaid carriers for new customers.”

The CPUC adopted its erroneous intrastate factor despite “soaring consumer demand for mobile data services,” said MetroPCS. Nearly all the prepaid company’s plans in California then and now include mobile broadband; all include unlimited texts and intrastate and interstate voice calls, it said.