State Regulation of Broadband

by Davis Wright Tremaine LLP

The Order attempts to minimize the possibility of state regulation of broadband Internet access service (BIAS), leaving only the most limited role for the states. The Order reaffirms that BIAS is an interstate service for regulatory purposes, and explains that the Commission has guarded against any state regulations that conflict with federal law. While the Order acknowledges that mixed-jurisdiction services are generally subject to dual/federal/state jurisdiction, it reaffirms that for regulatory purposes BIAS is interstate because it is impossible or impractical to segregate the intrastate and interstate components of the service. The Order also clarifies that states are bound by its forbearance decisions, that is, that under Section 10(e) of the Act, states are barred from imposing any statutory or regulatory obligations from which the FCC has forborne. While the Order gives lip service to a continuing role for the states (for example in the area of data collection), the overall tone and tenor of the Order suggests that, in the FCC’s view, states will have, at best, a very limited role with respect to any regulation of BIAS.

A difficulty with the Order’s analysis is that its overall justification of FCC authority to regulate broadband relies in part on Section 706, which expressly grants power to states to encourage deployment of advanced communications capabilities. Indeed, the Order continues to rely on the “virtuous cycle” theory – based entirely on Section706 – that was upheld by the D.C. Circuit in Verizon v. FCC. State reliance on the grant of authority in Section 706 is not hypothetical: California already has taken an expansive view of its authority over broadband based on that provision. Other states may view the FCC’s use of Section 706 in the Order as justification to expand their own authority despite the Commission’s strong preemption language.

Perhaps in anticipation of these possible developments, the Order announces the Commission’s “firm intention” to exercise case-by-case preemption of any state regulation that is inconsistent with the Order’s comprehensive regulatory scheme, setting the stage for battles over both conflict and field preemption. Only time will tell whether the Commission’s case-by-case approach will be a sufficient safeguard against any “overreaching” state regulations.

The Order also clarifies that, despite the states’ express authority to promote universal service under section 254 of the Act, the decision to temporarily forbear from universal service contributions requirements applies equally to state-run universal service funds. As a result, states may not impose any new state USF contributions on broadband—at least until the FCC rules on whether to provide for such contributions for the federal USF. In her statement in support of the Order, Commissioner Clyburn suggests that the FCC should “tread lightly when it comes to preempting the states’ ability to adopt and implement their own universal service funds,” noting that state universal service funds are distinct from any federal program. Again, only time will tell whether the FCC will eventually permit any BIAS revenues to be subject to state-level USF assessments.

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Davis Wright Tremaine LLP

Davis Wright Tremaine LLP on:

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