T-Mobile Urges 9th Circuit to Reverse Court Allowing Calif. USF Change

California’s connections-based method “is directly at odds” with the FCC’s revenue-based mechanism for USF contribution, T-Mobile and subsidiaries argued at the 9th U.S. Circuit Court of Appeals. In an opening brief Monday, they urged the court to reverse a U.S. District Court for Northern California decision and direct the lower court to issue a preliminary injunction against the California Public Utilities Commission decision that took effect April 1.

The 9th Circuit and district court rejected prior T-Mobile requests for emergency stays in three separate decisions (see 2304200026, 2304120010 and 2304100006). The CPUC’s answering brief is due May 30 (case 23-15490).

The FCC “explained that a revenues-based mechanism best advances universal service and that a contrasting connections-based mechanism raises a host of concerns,” said T-Mobile. The FCC repeatedly considered a flat fee but didn’t go ahead, the carrier said. "The FCC recognized that its longstanding revenues-based approach best preserves and advances universal service because that approach is competitively neutral, easily administrable, and avoids economic distortions."

Rejecting the FCC's decades-old revenue-based method, the California agency "fundamentally overhauled how it assesses surcharges on communications services to fund its 'universal service' programs," T-Mobile said. Under the CPUC's new method, "a flat fee applies to each access line, regardless of whether the services provided are surchargeable" and "how much revenue carriers earn from those services" or "customers pay for them.” The CPUC rule isn't "merely different from the FCC’s rule in some immaterial respect," it said.

The state method is expressly preempted by the 1934 Communications Act's Section 254(f), which prohibits USF rules that are "inconsistent" with FCC rules, and the section's competitive neutrality requirement that USF fees be equitable and nondiscriminatory, T-Mobile said. The district court "misinterpreted and misapplied Section 254(f)" when it found no problem with the CPUC rules being different from the FCC's, it said. "Those errors of law constitute an abuse of discretion.” The CPUC order violates competitive neutrality because it discriminates against wireless carriers in favor of LECs and because it exempts California LifeLine participants but not federal affordable connectivity program (ACP) participants, the wireless company said.

T-Mobile thinks it's likely to succeed on its claims, said the carrier: The court "disregarded the plain text of Section 254(f) and effectively read that provision’s express preemption clause out of the statute; it inverted the statutory scheme by subordinating the FCC’s primary role in universal service regulation to that of the CPUC; and it adopted a flawed interpretation of the competitive-neutrality requirement that systematically disfavors smaller communications carriers."

The district court agreed T-Mobile established "irreparable injury," said the company: And the CPUC doesn’t refute that the company stands to lose $11 million per month. The lower count didn't identify any harm to the CPUC from injunctive relief, the carrier said: "Nor is there any." Plus, it said, "the new rule will cause wireless consumers’ monthly charges to skyrocket and become unaffordable for many -- with an especially acute impact on lower-income families, elderly individuals, and marginalized communities who rely on wireless service as an essential part of their day-to-day lives.”

The CPUC exempted state LifeLine participants and the incarcerated from paying the new surcharge, but the agency "ignored requests to provide a similar exemption for carriers that provide the same services (including mobile broadband) to the same constituency of low-income individuals who participate in” ACP, said T-Mobile: Many low-income individuals aren't eligible for LifeLine, while most who haven't enrolled in the state program. Also, since only one line per household qualifies for LifeLine subsidy, people would still have to pay the surcharge for additional lines, it said.

The CPUC cited no evidence in its order that USF would be underfunded barring a contribution method overhaul, said T-Mobile: The record showed that the CPUC adjusts the revenue-based rate when needed and "can benefit from billions of dollars in federal funding for universal service.”

"Irrelevant" that the FCC hasn't expressly stopped states from using connection-based methods, said the wireless company. "Section 254(f)’s language expressly preempting inconsistent state rules would be unnecessary and superfluous if ... the onus fell on the FCC to police” 50 state USFs.