Judge Chews on 'Squishy' Standard for Federal-State USF Conflicts

Telecom law has a “squishy” standard for finding conflict between state and federal USF rules, said U.S. Magistrate Judge Laurel Beeler for Northern California in San Francisco at a virtual motion hearing Thursday. T-Mobile and subsidiaries want the court to preliminarily enjoin a $1.11 monthly per-line fee from taking effect April 1 in the state (see 2303100046). Beeler said she plans to issue a decision by Monday (docket 3:23-cv-00483).

“The fundamental issue about preemption is an interesting one,” said the judge. Communications Act Section 254(f) says states “may adopt regulations not inconsistent with the Commission's rules to preserve and advance universal service.” Beeler said the “'inconsistent with’ standard that applies here is pretty squishy.” She later added, “The law likes bright lines and this one isn't.”

"On the squishiness, there are always going to be some borderline cases,” said T-Mobile attorney Peter Karanjia of DLA Piper. “In this case, there really cannot be a serious dispute.” The carrier isn’t saying any difference, “no matter how trivial” would be inconsistent, but there's a “clear divergence” between the FCC’s revenue-based method and the California Public Utilities Commission’s new connections-based mechanism, he said. The FCC looked at such a mechanism in 2008 but pulled it from the agenda, Karanjia noted.

"‘Not inconsistent with’ is not just different,” said CPUC attorney David Fermino. The FCC never said states must act in lockstep, he said. And while the FCC considered but never adopted connections, it also never rejected the concept, said Fermino: There has been no "FCC pronouncement on this issue." But Karanjia asked what the point of Section 254(f) is if the FCC must still find and declare certain state actions as preempted.

"It does seem like California is trying to grapple" with technology changes, and it makes sense to change the rule “when you're looking at the realities of the business model,” where consumers are migrating to wireless, said Beeler. “It's a practical approach,” but "is it inconsistent with the FCC's rules to preserve and advance universal service?"

CPUC action was in pursuit of advancing universal service goals, stressed Fermino: The FCC never said anything the CPUC has done on USF is inconsistent, and if the court were to ask the FCC to weigh in on the case, the CPUC attorney is sure the federal agency would say the same.

Asking the FCC to file an amicus brief "would have been a great idea” when the complaint was filed, but Beeler hopes to write an order over the weekend, she said. Karanjia remarked that the CPUC could have asked the FCC to weigh in before it changed state USF contribution.

The FCC has ruled it doesn’t want USF fees on broadband at both state and federal levels, said Karanjia, citing the 2015 open internet order. Most wireless revenue comes from broadband, whereas the opposite is true for traditional wireline services, said the attorney: So while both wireless and wireline would now pay the same fee, there would be a “disproportionate impact” on wireless.

The CPUC order will harm low-income households, which tend to prefer wireless, said Karanjia: Most people have one landline in a house, but households would now have to pay $1.11 monthly per device. The CPUC likes to say the prior revenue-based method was unsustainable, but the agency gave no evidence that state USF would be underfunded under that policy, he said.

The CPUC considered impact to low-income Californians during its rulemaking process, said Fermino. "There are entities that are going to fall on either side of the decision."