FCC Small Cell Order – Preemption

On September 27 the FCC adopted new rules that apply to the deployment of small cells on utility poles, light poles, buildings and other infrastructure. The order largely preempts state and local authority and today’s blog will focus on the preemption issue.

The orders are in WT Docket No. 17-79; WC Docket No. 17-84 and comes in two parts. First is a Declaratory Ruling where the FCC examines and then claims authority to override local and state regulations on small cell deployment issues. The second portion of the order is a Third Report and Order that sets a new ‘shot clock’ for processing small cell applications and which sets caps on local fees for connecting small cell sites.

FCC orders often conflict with state and local regulations and the FCC always has to decide the extent to which they are willing to override state and local regulations. This is a particularly touchy topic for anything to do with pole attachments and rights-of-ways because the Telecommunications Act of 1996 explicitly gave states the right to establish their own rules governing pole attachments. Since that order 22 states have elected to establish their own rules for connecting to poles while the remaining states follow the FCC pole attachment rules. However, it’s never been clear to what extent the 1996 Act gave any rights to cities.

With that said, states are generally not allowed to establish rules that conflict with the intent of FCC rules. For example, the 1996 Act gave the rights for carriers to gain access to poles, ducts and conduits, but state regulation can’t get rid of that right. State pole attachment rules generally clarify the specific application of the FCC rules and in some cases are more stringent than the FCC rules. For examples, there are states that have shorter time lines for attaching fiber to poles than the FCC rules.

This particular order has more than the usual share of legalese, but my interpretation of this order is that it applies everywhere and that the FCC has largely preempted all state and local regulations related to small cells. For example, the order presumes that any local regulation that would cause a delay in new FCC’s expected timelines would constitute an ‘effective prohibition of service”. The FCC says explicitly that delays cause by any “state or local regulation of wireless infrastructure deployment constitutes an effective prohibition of service prohibited by Sections 253 or 332(c)(7) of the Communications Act.

In regulatory terms that’s strong language – for example, the order says that states can have rules covering issues like aesthetics or the undergrounding of utilities, but any such rules cannot delay the FCC timelines. That’s important because it provides a way for carriers to get a court injunction against any city that delays the small cell deployment process for any reason. I’ve read the order several times and my interpretation is that it’s nearly impossible for a municipality to say no to a small cell request. It looks like cities must meet the FCC timelines without exception or delay.

There was a concern by many cities that the FCC was going to end the municipal exemption for pole attachments that has excused municipally-owned poles from FCC pole attachment rules. The order doesn’t address that issue, so it doesn’t appear that these new rules would apply to utility poles owned by a municipal utility. It’s less clear to me if this order applies to light poles or other structures that don’t connect to wires. (See the first comment below – the FCC took the position in a footnote that the order applies to all municipally-owned assets in the public ROW, but is not so clear on assets outside the ROW).

There is also a practical issue that I don’t see addressed in the order. Not all parts of a small cell deployments are in the air and there can be cabinets and other devices at street level used to power the small cells. Since cities are not allowed to cause the delay of small cell deployment, that logically would preclude local that slow the ground-based part of such deployments. That is an expansion of FCC jurisdiction – they’ve never exerted jurisdiction over the placement of cabinets since those rules consider numerous local issues like safety, handicapped access and aesthetics.

This order is clearly tilted in favor of small cell carriers. The wording of the order reads like the industry wish list and even has some language suggested by the wireless carriers. The carriers want to be able to deploy small cells anywhere quickly, at a low cost, and this order grants them that right. I’ve seen articles that claim this is a billion-dollar giveaway to the carriers.

Since this order preempts local and state pole attachment authority I would expect a flood of lawsuits challenging the order. In this industry the best regulations have always been the ones that balance the needs of all parties. There are clearly local concerns about the proliferation of small cell devices and this ruling is deaf to local concerns. Interestingly the cellular carriers and a number of big cities have already negotiated solutions to deploying small cells – and in every case this ruling is more severe than arrangements the carriers have willingly agreed to. That is the best evidence that this order has gone too far in the favor of the carriers.

What Does the FCC Municipal Ruling Really Mean?

Scales-Of-Justice-12987500-300x300On the same day that the FCC passed its new net neutrality rules it also granted the petitions of Chattanooga TN and Wilson NC to allow them to expand their broadband networks. In both of these petitions the municipal network is surrounded by areas with poor or zero broadband, and residents of the area have been asking the two cities to extend their fiber network to serve them. But in both cases there were state laws that restricted the systems from expanding.

On the surface, the FCC ruling is only about these two specific cases, but the FCC has made it clear that they will entertain petitions by other jurisdictions that are being restricted by state laws. FCC Chairman Wheeler said in the ruling that there are several ‘irrefutable truths’ about broadband: “One is, you can’t say that you’re for broadband and then turn around and endorse limits on who can offer it. Another is that you can’t say, I want to follow the explicit instructions of Congress to remove barriers to infrastructure investment, but endorse barriers on infrastructure investment. You can’t say you’re for competition but deny local elected officials the right to offer competitive choices.”

While this ruling obviously gives great hope to many communities that don’t have broadband, there is still a long way to go until this ruling makes any practical difference in the market. There are already several parties that say they are going to challenge the ruling in court, so this issue will have to slog its way through the legal process before it goes into effect. The primary issue for a challenge is the FCC’s authority to overturn state restrictions on broadband.

The FCC is relying on language passed by Congress as part of the Telecommunications Act of 1996. In that law, section 706 of the Act says the following:

SEC. 706. ADVANCED TELECOMMUNICATIONS INCENTIVES.

(a) IN GENERAL-The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

Further, Section 253 of the Act also included language that that bars states from enacting laws that prohibited ‘any entity’ from providing any interstate or intrastate telecommunications service. I’ve read that language from the Act a number of times and it certainly, on the surface, seems to give the FCC the authority to override the telecom laws in North Carolina and Tennessee that stopped the municipal systems from expanding. I’ve chatted with a few of the legislators over the years that helped to write the Telecom Act and they believed that when they wrote the Act that they were enabling municipal competition.

But as is often the case, a law that Congress passes isn’t fully effective until it’s been tested in court. In this case there have been two prior challenges to the law. A year after the passage of the Act, the City of Abilene challenged the Texas law that was a flat ban on municipal competition in the state, and lost before the FCC and then on appeal to the federal Court of Appeals for the DC Circuit. In 1997, Missouri also banned public entities from providing telecom services. Cities in the state challenged this at the FCC, lost and then appealed to the Eighth Circuit Court of Appeals, which unanimously ruled in cities’ favor. The Supreme Court took the case and let the Missouri law stand.

But the current cases are different than the two prior challenges. Both of those cases challenged an outright ban to competition. But in the new cases, the cities asked to be relieved from specific restrictions that stopped them from expanding their existing service beyond a defined footprint. In Tennessee, the City of Chattanooga is restricted to offering broadband in the same area where they serve electric customers. In Wilson, the City is restricted to the City boundaries. In both cases there are nearby customers just outside of those boundaries that each city wants to serve, and the ruling gives them the right to expand.

So this is going to be up to the courts to decide. Certainly one thing has changed since those two earlier rulings in that the FCC is now in favor of overturning states’ rights. In the earlier cases the FCC ruled against the petitioners, and so the courts started with that refusal in judging the cases. These kinds of cases usually boil down to whether the FCC has the authority to rule, which is not exactly the same thing as ruling about whether the challenger to the law was right or wrong. In the last challenges the courts said that the FCC had the authority to deny the municipal petitions. This time any challenges will begin with an FCC ruling in favor of the cities and we’ll just have to wait and see if that makes any difference in the courts.