MetroPCS California, LLC v. Picker, No. 18-17382 (9th Cir. 2020)
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Federal law does not facially preempt California law governing universal service contributions from prepaid wireless providers. Federal law requires telecommunications providers, including wireless providers such as MetroPCS, to contribute to the federal Universal Service Fund, which helps provide affordable telecommunications access. California requires its own universal service contributions, adopting the Prepaid Mobile Telephony Services Surcharge Collection Act in 2014, which (prior to its recent expiration) governed the collection of surcharges from prepaid wireless customers. The CPUC issued resolutions implementing the Prepaid Act that required providers of prepaid services to use a method other than the three FCC recognized methods to determine the revenues generated by intrastate traffic that were subject to surcharge. MetroPCS filed suit challenging the CPUC's resolutions.
The panel held that the expiration of the Prepaid Act did not cause this case to become moot and that the panel therefore has jurisdiction to reach the merits of MetroPCS's preemption claim. On the merits, the panel held that preemption is disfavored because there was a dual federal-state regulatory scheme and a history of state regulation in the area of intrastate telecommunications. In this case, the CPUC resolutions are not facially preempted by the Telecommunications Act and related FCC decisions. The panel rejected MetroPCS's argument that the resolutions conflict with the requirement of competitive neutrality by depriving prepaid providers (but not postpaid providers) of the "right" to calculate intrastate revenues in a way that avoids assessing the same revenues as federal contribution requirements. Furthermore, the panel rejected MetroPCS's argument that because prepaid providers are deprived of that "right," the resolutions are preempted regardless of the treatment of competing providers. Therefore, the panel reversed the district court's ruling in favor of MetroPCS and remanded for the district court to consider in the first instance MetroPCS's other challenges to the resolution.
Court Description: Telecommunications. Reversing the district court’s summary judgment and remanding, the panel held that federal law did not facially preempt California law governing universal service contributions from prepaid wireless providers. The panel explained that federal law requires telecommunications providers to contribute to the federal Universal Service Fund from revenues the providers derive from their customers’ interstate telecommunications. The Federal Communications Commission has authorized three methods that wireless providers can use to distinguish between interstate and intrastate revenues. Federal law also permits states to require telecommunications providers to contribute to state universal service programs based on the providers’ intrastate revenues. California requires its own universal service contributions. In 2014, California adopted the Prepaid Mobile Telephony Services Surcharge Collection Act, which governed the collection of surcharges from prepaid wireless customers. The California Public Utilities Commission issued resolutions implementing the Prepaid Act that required providers of prepaid services to use a method other than the three FCC-recognized methods to determine the revenues generated by intrastate traffic that were subject to surcharge. The district court held that the CPUC resolutions were facially preempted by federal law, and the CPUC appealed. METROPCS CALIFORNIA V. PICKER 3 As a threshold matter, the panel held that the expiration of the Prepaid Act while this appeal was pending did not cause this case to become moot. Plaintiff MetroPCS, a prepaid wireless provider, sought declaratory and injunctive relief on its claim that federal law preempts the CPUC’s resolutions that required that prepaid providers use a uniform intrastate allocation factor, and not their chosen FCC- recognized method, to determine intrastate revenues subject to surcharge. The panel held that the case was not moot because MetroPCS had not complied with the CPUC’s 2017 and 2018 Resolutions, and the CPUC still plans to enforce them. On the merits of the preemption claim, the panel held that the CPUC resolutions were not facially preempted by the Telecommunications Act and related FCC decisions. The panel concluded that preemption was disfavored because there was a dual federal-state regulatory scheme and a history of state regulation in the area of intrastate telecommunications. The panel rejected MetroPCS’s theories in support of its claim that the CPUC resolutions were facially preempted: (1) that the resolutions conflicted with the requirement of competitive neutrality by depriving prepaid providers (but not their competitors) of the “right” to calculate intrastate revenues in a way that avoided assessing the same revenues as federal contribution requirements; or (2) that because prepaid providers were deprived of that “right,” the resolutions were preempted regardless of the treatment of competing providers. The panel reversed the district court’s summary judgment and remanded to the district court to consider in the first instance MetroPCS’s other challenges to the resolutions, including MetroPCS’s as-applied preemption challenge. 4 METROPCS CALIFORNIA V. PICKER
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