What You Need to Know About the Restoring Internet Freedom Court Decision

            The D.C. Circuit Court of Appeals affirmed most of the FCC’s Restoring Internet Freedom Order [1] largely on Chevron Doctrine deference grounds.  This two-pronged judicial review model first considers whether applicable statutory language is ambiguous.  If applicable law is clear and unambiguous, the court must assess whether the FCC complied with the legislative mandate.  If the applicable law has ambiguities, the court must consider whether the FCC’s chosen course of action was reasonable under the circumstances.  Because judges lack expertise in statistics, economics, electronic engineering, accounting, corporate management, finance etc. they must rely on the expertise resident at the regulatory agency and which advocacy and sponsored research it embraces.  In this case, the court opted not to second guess the FCC’s legal and economic rational, despite the agency’s clear preference for the filings that support its deregulatory agenda. [2]

            Put another way, experts at the FCC and ones financed by stakeholders will have ulterior motives precluding an unbiased assessment, but appellate courts will not reject selective and even one-sided evaluation unless the process exceeds generous deference and a basic assessment of reasonableness.  In this case, the court opted not to question the FCC’s reclassification of broadband Internet access as an information service, wireless broadband access as a private, non-common carrier mobile service and the limited scope of new transparency requirements in lieu of prior open-ended general conduct standard and the specific rules prohibiting blocking, throttling, and paid prioritization of traffic.

            The court did reverse the FCC on four specific areas where the court determined that the agency failed to set out its legal authority or address the implications and impact of its deregulatory initiative.  The court vacated the FCC’s blanket preemption of state laws and that would impose regulatory requirements, despite the FCC’s near complete abdication of jurisdiction.  The court also remanded to the FCC the duty to address three discrete issues that the agency largely ignored:

(1) The Order failed to examine the implications of its decisions for public safety; (2) the Order does not sufficiently explain what reclassification will mean for regulation of pole attachments; and (3) the agency did not adequately address Petitioners’ concerns about the effects of broadband reclassification on the Lifeline Program. [3]

            The court fully embraced the FCC’s legal, technical and economic rationales for reclassifying broadband Internet access as a largely unregulated information service.  The decision validates the FCC’s emphasis that Internet Protocol domain name identity queries (“DNS”) and temporary storage of traffic—caching—justify an overall information service classification.  Because these two information service functions are inextricably linked with other functions, which do include a telecommunications transport function, the overall composite service cannot be functionally subdivided into separate information services and telecommunications service elements. [4]

            In making this finding, the court heavily relied on the Brand X case precedent [5] for guidance and validation.  In this prior case, the Supreme Court also relied heavily on the Chevron Doctrine to support a prior reclassification of broadband Internet access from telecommunications, common carriage to the largely unregulated information services designation.  Brand X also determined that DNS and caching were “inextricably intertwined” with high speed bit transmission that the FCC could reasonably conclude that Internet Service Providers did not offer a telecommunications service on a standalone basis, a conclusion reached by Justice Scalia in dissent. [6]

            The court also rejected the view that these two functions fit within an exception to the normal application of the information service classification for a subset of information processing functions that satisfy necessary telecommunication management requirements, rather than constitute part of an information service.  The court refers to its prior affirmance of the FCC’s common carrier reclassification decision, United States Telecommunications Ass’n. v. FCC, 825 F.3d 674 (D.C. Cir. 2016) to emphasize that the case only permitted Title II common carrier attribution to functions like domain name look ups and caching, but did not mandate it. [7]

            The court also validated the FCC’s reclassification of mobile broadband Internet access as a private, non-common carrier service, despite an amendment to the Communications Act creating a definition for Commercial Mobile Service provided by cellular companies in their provision of voice and text services accessible to and from the wireline public switched telephone network (“PSTN”). [8] The court was predisposed to side with the FCC so that the Commission would not have to confront a “statutory

contradiction” [9] of having reclassified wired broadband access an information service, but not its wireless counterpart that the FCC increasingly believes constitutes a functional and competitive alternative.  Such regulatory asymmetry could adversely impact the commercial attractiveness of wireless services, particularly if one believes any sort of government oversight imposes costs, such as reduced innovation, infrastructure investment and flexibility.

            The court addresses three areas that support the FCC’s information services reclassification.  First, the court notes that the applicable statutory language uses public switched network and not public switched telephone network.  The absence of telephone, in conjunction with the Chevron Doctrine and the Brand X case precedent, supports “leaving the door open to a different, adequately supported, reading, which the Commission has provided here.” [10] The FCC now considers the use of IP addresses, in conjunction with telephone numbers, as sufficiently uncoupling wireless broadband networks from the telecommunications service classification even though cellular telephone networks surely provide voice telephony, including access to the wired PSTN, in addition to broadband Internet access.  The court also accepts the FCC’s argument that even though Voice over the Internet Protocol services make it possible to originate and receive telephone calls, that functionality by itself does not make wireless networks fully interconnected with the PSTN, nor does it deemphasize the core, non-telecommunications nature of broadband Internet access.  In a nutshell, “blurring [of information and telecommunications services] is not erasing.” [11] Lastly, the court supports the FCC’s determination that mobile broadband does not qualify as a functional equivalent to mobile voice even though consumers use a single handset and wireless network to access both services.

            Arguably the most questionable aspect of the court’s decision lies in its endorsement of sponsored research claiming to show that network neutrality regulation had a direct and significant impact on infrastructure investment and innovation. As part of its analysis to determine whether the FCC acted reasonably and not in violation of the Administrative Procedure Act prohibition on arbitrary and capricious decision making, the court reviews the evidentiary record.  The court did not question the validity, significance, methodology, or rigor of research supporting the Commission’s view that network neutrality rules and regulations created significant disincentives for innovations and investment.  Instead it appears to downplay the scope, nature and reliance of the Commission’s reference to sponsored research supporting its views established well before the issuance of a decision.  While deeming the FCC’s references and reliance on these studies as reasonable, the court also appears to characterize the Commission’s use of the research as minor and fully apprised of the “modest probative value to studies attempting to draw links between the Title II Order and broadband investment . . ..”[12]  This characterization does not jibe with the many instances where FCC rulings [13] and statements by Chairman Pai [14] and others emphasized the disastrous impact on network neutrality regulation. The FCC and D.C. Circuit refer to Title II regulation as “utility-style regulation,” [15] even though the FCC had established rules that substantially exempted broadband Internet access providers from conventional oversight including the elimination of any regulation of rates for service, or profit margins. [16]

            The court did not entirely endorse the FCC’s world view and deregulatory agenda.

The court rejected as unlawful the FCC’s attempt to foreclose any state regulation inconsistent with the Commission’s policy including efforts to impose network neutrality regulations for over which he Commission now lacks jurisdiction. [17] In effect, the FCC cannot abandon jurisdiction over broadband Internet access and then foreclose states from asserting jurisdiction over intrastate service: “[I]n any area where the Commission

lacks the authority to regulate, it equally lacks the power to preempt state law.” [18]

We can expect some states, such as California, New York and Vermont to enact network neutrality regulations that the FCC probably will reject as unlawful despite the clear direction provided by the D.C. Circuit.

            Additionally, the court considered it arbitrary and capricious for the FCC not to have considered the implication for public safety in light of the Commission’s statutory duty to promote “safety of life and property through the use of wire and radio communications.” [19]  The court noted that Verizon had deliberately slowed the data speeded available to first responders in California as they tried to contain forest fires.  Such “throttling” is now permissible under the FCC rules, but the court required the Commission to address its impact on public safety.

            The court also recognized that the FCC left unresolved issues pertaining to pole attachments, because the FCC shares jurisdiction with states and municipalities on this matter and providers of cable, telecommunications and information services seek access to utility poles even though the directly applicable statutory mandate, 47. U.S.C. § 224(a)(4) refers only to Title II regulated telecommunications services. [20]

            The court also required the FCC to address the impact of the largely deregulated information services classification on the Lifeline Program that subsidizes low-income consumers’ access primarily to Title II regulated telephone service and handsets. [21]  The court determined that the FCC left unanswered important questions whether stand alone broadband service providers can qualify for universal service funding despite eligibility criteria limiting eligibility to Title II regulated common carriers. [22]

           

           

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[1]           Mozilla Corp. v. FCC, No. 18-1051 (D.C. Cir. Oct. 1, 2019); Retrieved from: https://www.cadc.uscourts.gov/internet/opinions.nsf/FA43C305E2B9A35485258486004F6D0F/$file/18-1051-1808766.pdf [hereinafter cited as Mozilla Corp. v. FCC].

[2]           “Regulation of broadband Internet has been the subject of protracted litigation, with broadband providers subjected to and then released from common carrier regulation over the previous decade. We decline to yet again flick the on-off switch of common-carrier regulation under these circumstances.” Id. at 145-46.

[3]           Id. at 13.

[4]           “[J] just as the USTA petitioners ‘fail[ed] to provide an unambiguous answer to’ whether ‘broadband providers make a standalone offering of telecommunications,’ USTA, 825 F.3d at 702, Petitioners have not done so here. Nor have they shown the Commission’s stance to be unreasonable. We conclude, under the guidance of Brand X, that the Commission permissibly classified broadband Internet access as an ‘information service’ by virtue of the functionalities afforded by DNS and caching.” Id. at 45.

[5]              National Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005).

[6]              See Rob Frieden, What Do Pizza Delivery and Information Services Have in Common? Lessons from Recent Judicial and Regulatory Struggles with Convergence, 32 RUTGERS COMPUTER & TECH L.J., No. 2, 247-296 (2006).

[7]              “To begin with, Petitioners misconstrue USTA. As they do persistently, they gloss passages that find parts of the Title II Order to be permissible readings of the statute as mandating those readings—when the passages plainly do not do so. A case in point is the treatment of the TME. Petitioners say that ‘[t]his Court has already agreed that DNS and caching fall within the terms of the telecommunications management exception.’ Mozilla Br. 43 (emphasis added) (citing USTA, 825 F.3d at 705). Yet all we said in USTA was that we were ‘unpersuaded’ that the FCC’s ‘use of the telecommunications management exception was * * * unreasonable.’ USTA, 825 F.3d at 705. The Title II Order, in other words, adopted a permissible reading, though not a required one.”  Mozilla Corp. v. FCC at 23.

[8]           47 U.S.C. § 332, Mobile Services (2018).

[9]           See Mozilla v. FCC at 49.

[10]          Id. at 50. “Similarly in USTA we rejected a claim that 47 U.S.C. § 1422(b)(1)(ii)’s use of the term “public switched network”— in a context pretty clearly meaning only the telephone network—meant that the Commission was required to so limit its definition for purposes of Section 332.  Id. at 52.

[11]          Id. at 58.

[12]          Id. at 76.  Empirical studies are available that measure actual investment outcomes.  See, e.g., Christopher Alex Hooton, Testing the economics of the net neutrality debate, TELECOM POL’Y (Sep., 2019); retrieved from: https://doi.org/10.1016/j.telpol.2019.101869.

[13]          “[T]he record shows that the existing regulations constrain technological advances and deter broadband infrastructure investment by creating disincentives to the deployment of facilities capable of providing innovative broadband Internet access services.” Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities, Report and Order and Notice of Proposed Rulemaking, 20 F.C.C. Rcd. 14853, 14865 (2005).

[14]         “These Internet regulations will work another serious harm on consumers. Their broadband speeds will be slower than they would have been without these regulations.

The record is replete with evidence that Title II regulations will slow investment and innovation in broadband networks.” Protecting and Promoting the Open Internet, Report and Order on Remand, Declaratory Ruling, and Order, Dissenting Statement of Commissioner Ajit Pai, 30 F.C..C Rcd. 5601, 5927  (2015).

[15]          See Mozilla v. FCC at 10.

[16]          The court did find troubling “the Commission’s failure to grapple with the fact that, for much of the past two decades, broadband providers were subject to some degree of open

Internet restrictions,” arguably ample time to adjust to any regulatory restrictions.  See, Id. at 86.

[17]          “The Commission ignored binding precedent by failing to ground its sweeping

Preemption Directive—which goes far beyond conflict preemption—in a lawful source of statutory authority. That failure is fatal.” Id. at 121.

[18]          Id. at 123.

[19]          Id. at 93 citing 47 U.S.C. §151.

[20]          Id. at 104. “The Commission offered, at best, scattered and unreasoned observations in response to comments on this issue. Because the Commission did not adequately address

how the reclassification of broadband would affect the regulation of pole attachments, we remand for the Commission to do so.” Id. at 104-05.

[21]          In the Telecommunications Act of 1996, Congress codified and expanded the FCC’s universal service mission to cover “an evolving level of telecommunications services that the Commission shall establish periodically * * *, taking into account advances in telecommunications and information technologies and services.” 47 U.S.C. § 254(c)(1).

[22]          “[B]roadband’s eligibility for Lifeline subsidies turns on its common-carrier status. See In re FCC 11-161, 753 F.3d 1015, 1048–1049 (10th Cir. 2014) . . . As a matter of plain statutory text, the 2018 Order’s reclassification of broadband—the decision to strip it of Title II common-carrier status—facially disqualifies broadband from inclusion in the Lifeline Program.” Mozilla v. FCC at 111.

Result-Driven Federalism: How the FCC Rationalizes the Lawfulness of Preemption

          

            The current FCC pushes the federal preemption envelope, currently with an initiative to further constrain states and municipalities from regulating and requiring payment for wireless antenna installations on public property.  See https://docs.fcc.gov/public/attachments/DOC-353962A1.pdf.  Once upon a time, Republicans deeply respected the concept of federalism: deference to state rights and reticence to extend the wingspan of federal oversight and interference.  Such regulatory humility evaporates when preemption achieves countervailing goals.  

            For wireless antenna site policy, the FCC majority sees the need to preempt greedy non-federal governments who want to extort money from wireless carriers.  Apparently, the goal of preventing outrageous rent extraction and delays in authorizing national security enhancing 5^th Generation wireless justifies aggressive preemption, despite clear language in the Communications Act mandating shared jurisdiction.

            I can appreciate that some city councils, in particular, might look at wireless tower site authorization as a cash cow.  I can anticipate that some municipalities might try to extort outrageous payments and use the prospect of delay as negotiating leverage.  But I also can see wireless carriers using the FCC as lead blockers to beat municipalities and their citizens into submission.  What’s good for a wireless carrier must be good for society, right?  Tower siting decision making has nothing to do about aesthetics and respecting history and everything to do about ripping off big, bad corporations.

            Antenna siting has become a contentious issue, because of an ever increasing number of needed locations.  The migration to 5^th Generation wireless service will trigger a massive increase in antenna sites, because new technologies have smaller “footprints” requiring more antenna installations.  This matter is all about money, but conflicting interpretations of federalism partially obscure this reality.

            Money and serving different constituencies force FCC regulators to abandon any semblance of jurisprudential consistency.  In this strange time, a political party predisposed to support federalism and reliant on the Federalist Society to vet judicial candidates, has to turn its back on a baseline and fundamental philosophical construct.  Republican FCC Commissioners want largely to preempt states and municipalities from economic regulation of wireless tower sites, but they rallied around the state’s right flag when their Democratic counterparts wanted to preempt state laws prohibiting the installation or expansion of Wi-Fi and other broadband networks.  The Sixth Circuit Court of Appeals accepted the argument that Congress did not sufficiently articulate a federal mandate of supporting broadband technology deployment and preventing laws, regulations and policies that thwart this goal.  See http://www.opn.ca6.uscourts.gov/opinions.pdf/16a0189p-06.pdf.

            Reasonable people can disagree agreeably about the breadth, reach and scope of the FCC’s jurisdiction.  What I can’t tolerate is the sanctimony and righteous indignation of federalist advocates who readily ignore the principle when favored stakeholders knock on their door.

             

The Ambivalently Federalist FCC

            With all this talk about draining the Washington, D.C. swamp and its entrenched federal government occupants, the FCC remains quite enamored with federal preemption of state and local initiatives. I cannot see a coherent rationale for depriving non-federal actors of their role as laboratories for innovative regulation and better, on-site agents.  Instead, the FCC--with increasing frequency--seems to embrace preemption more often than deference to states and municipalities.

            On the federalist side, Chairman Ajit Pai fiercely endorsed the right of states to regulate inmate intrastate calling rates, even if the rates reach extortionate levels.  The Chairman gladly defers to states that have enacted barriers or prohibitions on municipal Wi-Fi and fiber optic networks.  

            On the federal preemption side, both Democratic and Republican majorities at the FCC frequently foreclose state and local initiatives.  Sometimes preemption prevents extortionate behavior, such as when cities delay or condition market entry.  But other times, I wonder if the FCC takes a partisan stance rather than a principled one.

            I am onboard when the FCC attempts to expedite state and local administrative procedures in granting franchises, access to rights of way and necessary permits.  However, the FCC also wants to constrain, if not prohibit, non-federal involvement in such diverse matters as privacy, universal service funding and tower siting.  

            If state and local regulators are closer to the people and perhaps better versed in the issues, why is the FCC so keen on preventing them for serving?

Consistently Inconsistent: How Very Large ICT Ventures Cannot Maintain a Consistent Legal/Regulatory Posture

            Technological and marketplace convergence makes it increasingly difficult for large, integrated firms, like AT&T, to maintain a single, consistent position on legal and regulatory issues.  This results in rich, irony. 

            Consider AT&T’s recent Kentucky law suit to prevent Google Fiber from using federal pole attachment law to secure access to AT&T-owned telephone poles, at relatively attractive rates, using a congressionally created formula.  See, e.g., http://www.bizjournals.com/louisville/news/2016/05/25/where-at-ts-lawsuit-against-the-citystands.html. 

            This litigation reeks of irony, because AT&T, in its capacity as an Internet Service Provider, would qualify under federal law to attach lines to poles owned by electric, telephone and cable television companies.  Federal pole attachment law prevents companies from refusing to provide pole access, or to allow access, but only at extortionate rates.  AT&T surely would benefit in cities where it does not own telephone poles and needs to install lines using the poles of another, potentially competing company.  But of course AT&T does not make it a practice of trying to compete in localities where it does not also happen to owe telephone poles.

            Adding to the irony—make that disingenuousness and other D words—is AT&T’s consistent legal and regulatory position on state and municipal laws and ordinances affecting access to cellphone towers.  When it comes to that technology, which AT&T considers a functional equivalent and competing option, the company vigorously asserts that federal law preempts state and municipal laws.

            Clearly both wireline and wireless access to the Internet qualifies as interstate telecommunications.  A long body of case precedent supports a “contamination” standard that favors federal preemption, and in turn FCC jurisdiction, whenever a line carriers both interstate and intrastate traffic that cannot be separated.  AT&T regularly seeks federal preemption of state and municipal laws that impose any sort of cost, delay, environmental impact assessment, etc. Federal preemption renders the state and municipal law invalid and inapplicable. 

             The FCC recently failed to convince an appellate federal court that the Commission should be able to preempt any and all state laws that limit or prohibit municipalities from offering Wi-Fi service. See http://docs.techfreedom.org/Tennessee_v_FCC.pdf.

This means there are some instances where federalism prevails, i.e., the national legislature did not clearly and unconditionally prevent states from enacting laws and some argument can be made that the law does not affect interstate commerce.  But when it comes to still lawful state and municipal laws affecting tower locations, etc. AT&T speaks clearly and unconditionally: that federal law severely restricts what states and municipalities can do, despite the intense local nature of tower siting issues.

            Ironically, AT&T’s absolute certainty that federal law trumps states and cities in terms of wireless Internet access, does not extend to functionally equivalent wireline Internet access.  This has nothing to do with respecting the “Rule of Law” and everything to do with stifling Goggle and the innovation and price competition it would offer. 

             The same conclusion applies to those incumbent carriers opposing municipal Wi-Fi networks and coverage expansion.  These carriers invoke law to short-circuit competition, but in other forums invoke the same laws, policies and precedent to justify their lawful right to ignore state and municipal law.  Consider this strategy rent seeking and not some lofty respect for the Constitution.

             

Federalism Versus Balkanization and Muni Wi-Fi

         While most attention today focused on the FCC’s Open Internet, I was intrigued with the discussion—make that righteous indignation—presented by Commission’s Pai on the FCC’s partial preemption of state laws restricting territorial build outs by municipal Wi-Fi networks.  Commissioner Pai gave an extensive review of Constitutional law with emphasis on state sovereignty.

          Commissioner Pai never addressed the considerable body of case precedent favoring FCC preemption of state regulation, including the attempt by state public utility commissions to regulate—if not prohibit-Voice over the Internet Protocol (“VoIP”).  See Minn. PSC v. FCC, 394 F.3d 568 (8th Cir. 2004).  States’ rights notwithstanding, many courts share the FCC’s view that much in telecommunications and now the Internet involve interstate commerce. 99.9999999+ percent of the time, Internet traffic crosses a state border.  Over the years, such a crossing “contaminated” any pure intrastate link which arguably includes the wireless few feet linking a tablet and the Internet cloud.

          Not so long ago Commissioners of both parties would express concern about “balkanization” of telecommunications policy, i.e., fragmentation and proliferation of many inconsistent state policies.  That environment would generate “regulatory uncertainty” and “disincentives for investment in next generation networks.”  Now Commissioners and others earn brownie points for how well they can express fealty to the Constitution.

          An ignored but obvious issue in the debate lies in the vast increase in scrutiny and involvement in telecommunications policy by groups such as the American Legislative Exchange Council.  The real possibility exists that ALEC offered state legislators in places like North Carolina and Tennessee a template for a law few framed as pro-market/pro-state.  Might state legislators have voted for something without much analysis?

          In any event I saw a huge irony in the universal view that America needs more competition in broadband, but Commission Pai’s insistence that municipalities do not count, even when no one else seems “incentivized” to make the effort.

Who's Who in Telecommunications Preemption

            In the not too distant future the FCC will preempt state laws that prevent municipalities from offering Wi-Fi services.  About 19 states have done so largely because private carriers and their trade associations have asserted that public ventures cannot operate efficiently, preempt private enterprise, unfairly have lower costs of capital and tap taxpayers to sustain deficit operations.  In my home state, Bell of Pennsylvania secured legislation that explicitly granted it veto power over any municipal operation outside Philadelphia.

            My initial instinct supports private options in lieu of state or municipal efforts.  However, at some point it becomes fruitless to wait for the marketplace to support private carrier market entry, especially in rural areas.  Incumbent carriers cannot have it both ways: 1) expressing righteous indignation at municipal initiatives, but also 2) refraining from making the investment themselves. Most municipalities install Wi-Fi, because private carriers will not do it and city officials assume wireless broadband access will enhance the welfare of citizens and establish a comparative advantage vis a vis other localities lacking such access. 

           Arguably Wi-Fi constitutes an essential service (maybe not a public utility) that consumers increasingly assume to be available everywhere.  As towns developed in the United States, municipal governments created water and sewage authorities rather than await private ventures that might consider such sunk investment as prudent.

            I do not seeing muni wi-fi as evidence of governmental mission creep where market failure exists.  Municipalities become the carrier of last—and only—resort.

            A different and more complex issue lies in the lawfulness of federal preemption.  Case precedent supports preemption when interstate service becomes so integrated with intrastate service that the two types of service are not separable.  In effect the interstate service “contaminates” and prevails so that the FCC can lawfully assert jurisdiction.  Additionally case law supports FCC preemption when a service evidences basic long-haul, interstate characteristics.   Internet access typically involves traffic routing that crosses state borders.  Lastly the FCC can prempt a service that constitutes a functional equivalent to, or interconnects with a federally regulated service.  A federal court affirmed the FCC’s preemption of state Voice over the Internet Protocol regulation (the Vonage case, Minn. PSC v. FCC, 394 F.3d 568 (8th Cir. 2004) based on the fact that most services interconnect with federally regulated long distance telephone service.  Additionally courts are receptive to arguments that different regulation by 50+ jurisdictions would “balkanize” and unnecessarily complicate the regulatory process.

            So why all the agitation by incumbent carriers?  I cannot see municipal networks becoming a major service alternative, particularly for larger cities where some attempts already have failed.  Likewise I don’t see incumbents hell-bent to offer “free” wi-fi service, although they may execute a strategy to use wi-fi for back-haul and video delivery to off-load traffic from 3G and 4G cellular networks.

            Perhaps incumbents simply shoot first and ask questions later on any initiative that does not include them and their approval. Maybe incumbents want to foreclose any unlicensed alternative to licensed operations, particularly ones that cost billions to acquire in spectrum auctions.

            Unlike the network neutrality debate, I believe incumbents will have a harder time convincing an appellate court to overturn the FCC.  This court would have to ignore ample case precedent, but who knows maybe the Supreme Court will ultimately hear the case and change course so that federalism and states’ rights trumps common sense.

Grieving Loss of the Filed Rate Doctrine

In their quest for deregulation wireless carriers in the United States may regret one regulatory feature: the Filed Rate doctrine and more generally the power of tariffs to establish compulsory contractual terms and conditions. With tariffs carriers enjoy substantial insulation from subscriber law suits and liability for violating consumer protection safeguards. Presumably a regulator approved tariff offers such adequate consumer safeguards that other consumer protections would be unnecessary. In any event the tariff supersedes any contract or marketing promise made to seal the deal.

In the current wireless environment the carriers apply “take it or leave it” contracts with subscribers and no longer have to file tariffs. The carriers have to defend their contracts and their often suspect behavior against violations of state consumer, fair trade and other laws. The carriers now seek to remove the applicability of such laws on federal preemption grounds, i.e., that the risk of balkanized policies—50 different jurisdictions applying different laws—would so confuse and otherwise harm consumers that the FCC needs to establish one uniform set of rules.

In light of the FCC’s current lax attitude toward consumer protection federal preemption would offer wireless carriers a sweet deal: make some minor accommodation on early termination charges and receive some possibly significant degree of insulation from state consumer protection laws. What consumers save in terms of pro-rated early termination charges, the FCC will transfer that and more if wireless carriers can get away with behavior that otherwise would have them paying millions in damages for violating state law.