D.C. Circuit will not require Commission to set intrastate termination rates in first instance.
When it comes to setting “reasonable compensation” rates for the termination of intrastate phone traffic, the FCC normally defers in the first instance to state authorities. And now, in the case of MetroPCS California v. FCC (No. 10-1003), the D.C. Circuit has confirmed that that deferential approach is permissible – even if it means that the result may be a “patchwork of regulatory schemes” facing phone service providers across the country, with each state fashioning its own approach to “reasonable compensation”.
The question arose when a local exchange carrier (LEC) in California unilaterally set a rate for terminating purely intrastate phone traffic from MetroPCS California (MetroPCS), a California commercial mobile radio service (CMRS) provider. MetroPCS objected to the rate, and the LEC complained to the FCC that MetroPCS wasn’t paying like it should.
The FCC didn’t resolve the complaint; instead, it held the complaint in abeyance to give the California Public Utilities Commission (CPUC) a chance to set the appropriate rate. Unhappy with that approach, MetroPCS asked the U.S. Court of Appeals for the D.C. Circuit to step in and require the Commission to set the rate itself. The Court stepped in but, presumably to the chagrin of MetroPCS, the Court sided with the Commission.
MetroPCS thought that the FCC is statutorily obligated to set the “reasonable compensation” intrastate termination rates itself, or at least to provide “guidance” to the CPUC on “how to set a reasonable rate”. It appears that MetroPCS has at least one more think coming.
While it is true that the Communications Act gives the Commission authority to ensure reasonable rates for mobile radio services, the Act does not specify that the FCC must itself set all such rates. With that in mind, the Commission routinely refers disputes about intrastate termination rates to local authorities (here, the CPUC) so that those authorities can make the first call. In that way the Commission respects the states’ traditional authority to set termination rates for intrastate traffic. Of course (at least as the Court sees it), the FCC may eventually preempt state-set intrastate termination rates that undermine the federal policy of encouraging interconnections between CMRS providers and LECs, but the FCC is content to let the states have the first say in what those rates should be.
According to the D.C. Circuit, that approach is consistent with the Act – and with the longstanding policy of leaving wholly intrastate matters to the states.
The Court’s opinion here does not appear to break any new ground. Rather, its decision reflects a conventional application of the Chevron analysis under which an agency has considerable discretion to interpret ambiguities in its governing statute.
Cool quote of the opinion. Rejecting MetroPCS’s general argument (i.e., that the Commission’s approach of deferring to states relative to intrastate termination rates undermines the broad purpose of the Communications Act), the Court quotes from a dissenting opinion of Justice Scalia: “‘The Act must do everything necessary to achieve its broad purpose’ is the slogan of the enthusiast, not the analytical tool of the arbiter.” Looks like we can all scratch the old “broad purpose” approach off our list of go-to arguments.