20000831Brief on Supremacy Clause.doc

CHERI C. COPSEY
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 5142

Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983

Attorney for the Commission Staff

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE JOINT PETITION OF ROBERT RYDER, DBA RADIO PAGING SERVICE, JOSEPH MCNEAL, DBA PAGEDATA AND INTERPAGE OF IDAHO, FOR A DECLARATORY ORDER AND RECOVERY OF OVERCHARGES FROM U S WEST COMMUNICATIONS, INC.
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CASE NO. USW-T-99-24

COMMISSION STAFF BRIEF ON THE EFFECT OF THE SUPREMACY CLAUSE

COMES NOW the Commission Staff of the Idaho Public Utilities Commission, by and through its attorney of record, Cheri C. Copsey, Deputy Attorney General, and in response to Commission Order No. 28473 dated August 9, 2000, files this brief analyzing the effect of the Supremacy Clause on this Commission’s July 5, 2000 (“July Order”) decision. Order No. 28427. Petitioners alleged on Motion for Reconsideration that the recent Federal Communications Commission (“FCC”) paging decision, TSR Wireless, LLC v. U S WEST, (“TSR Wireless Order”) requires this Commission to change its July Order and grant them relief. They based their argument on the Supremacy Clause.
However, the case law is clear that while the Supremacy Clause allows the federal government to preempt state law, it cannot obligate this Commission to enforce federal law. Printz v. United States, 521 U.S. 898, 912, 117 S.Ct. 2365, 2373 (1997); New York v. United States, 505 U.S. 144, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992). Only an express delegation of authority from the state legislature can delegate authority or impose a duty on the Commission. This Commission is a creature of state statute and its authorities are controlled by the authority delegated to it by the state legislature in statute; it has no authority other than that expressly granted to it by the Legislature. Alpert v. Boise Water Corporation, 118 Idaho 136, 140, 795 P.2d 298, 302 (1990). Therefore, such authority must be specifically identified in the statutes and cannot be conferred by federal law. Because no such authority exists, the Commission’s July Order should not be changed.
The Petitioners do not appreciate the fact that the basis for the Commission’s July Order is that the Commission’s authority to review matters that are not regulated under Title 61 and are contained in a price list is specifically limited by state law. See Idaho Code § 62-606. The Commission’s July Order is not controlled by the Metzger letter or federal law. The TSR Wireless Order does not change the legal basis for the Commission’s decision. Therefore, the Staff urges the Commission to reaffirm its July Order (Order No. 28427) to dismiss the complaint.
ARGUMENT
The Petitioners allege on reconsideration that through the Supremacy Clause of the United States Constitution, the FCC rules obligate the states -- and in this case, the Commission -- to enforce the recent FCC TSR Wireless Order. However, the Petitioners are wrong. State utility commissions are not the handmaiden of the federal government and are not required to implement federal law. There are several reasons the Commission has no authority to enforce the FCC TSR Wireless Order in this case.
First, the particular services and dedicated facilities offered by U S WEST (now Qwest) are not price regulated by the Commission under Title 61. See Idaho Code § 62-606. State law specifically allows regulated local exchange carriers like U S WEST (Qwest) to elect to remove nonbasic local services from the Commission’s authority to regulate prices. As the Commission found in its July Order, U S WEST (Qwest) properly elected to remove these non-basic local services from the Commission’s authority. See July Order at footnote 2. The Petitioners have not challenged that finding. Because the Commission has no authority to control the prices for these services, it has no authority to apply the TSR Wireless Order holding to this case.
Second, even if U S WEST (Qwest) had not elected to deregulate these services, the FCC’s TSR Wireless Order improperly interferes with the Commission’s authority to set rates. The FCC does not have authority to preempt state commission approved tariffs establishing the prices and conditions for providing dedicated intrastate facilities like trunks and lines. Louisiana Public Service Commission v. Federal Communications Commission, 476 U.S. 355, 106 S.Ct. 1890 (1986).
Finally, the FCC decision clearly violates the United States Constitutional prohibition against taking private property without compensation.
I. State law does not permit this Commission to regulate the prices for these services.
The Commission’s July Order is not controlled by the Metzger letter or federal law nor is it preempted by the Supremacy Clause of the United States Constitution. The decision is constrained by state law. The services and facilities offered and provided by U S WEST (Qwest) are regulated under Title 62, not under the more rigorous Title 61.
The Supremacy Clause does not operate independently to require a state agency to implement or enforce federal law.
While the Supremacy Clause generally grants Congress the power to “preempt” state law, it has no affect on the issues before the Commission in this complaint. Preemption under the Supremacy Clause may occur in several ways. For example, Congress, in enacting a federal statute, may clearly express a clear intent to preempt state law. Louisiana, 106 S.Ct. at 1898, citing Jones v. Rath Packing Co., 430 U.S. 519, 97 S.Ct. 1305 (1977). Moreover, preemption may occur when there is an actual conflict between federal and state law or where “Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the States to supplement federal law.” Louisiana, 106 S.Ct. at 1898, citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890 (1983); Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210 (1963); Free v. Bland, 369 U.S. 663, 82 S.Ct. 1089 (1962); Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 67 S.Ct. 1146 (1947); Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399 (1941). However, it is basic constitutional law that the Supremacy Clause does not empower the federal government to compel the States to implement, enact or administer federal regulatory programs. Printz, 117 S.Ct. at 2373; New York, 112 S.Ct. at 2435.
The Constitution established a system of “dual sovereignty.” Printz at 521 U.S. 918 citing Gregory v. Ashcroft, 501 U.S. 452, 457, 111 S.Ct. 2395, 2399, 115 L.Ed.2d 410 (1991); Tafflin v. Levitt, 493 U.S. 455, 458, 110 S.Ct. 792, 795, 107 L.Ed.2d 887 (1990). As the United States Supreme Court ruled in Printz, residual state sovereignty is both implicit and express. Printz at 521 U.S. 919. State sovereignty is expressly guaranteed by the Tenth Amendment which states “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Id.
In Printz, Justice Scalia wrote that “[t]he Framers’ experience under the Articles of Confederation . . . persuaded them that using the States as the instruments of federal governance was both ineffectual and provocative of federal-state conflict.” Id. at 919 citing The Federalist No. 15. Moreover, “the Framers rejected the concept of a central government that would act upon and through the States, and instead designed a system in which the State and Federal Governments would exercise concurrent authority over the people--who were, in Hamilton’s words, “the only proper objects of government.” Id. at 919-920 citing The Federalist No. 15, at 109.
[E]ven where Congress has the authority under the Constitution to pass laws requiring or prohibiting certain acts, it lacks the power directly to compel the States to require or prohibit those acts.... [T]he Commerce Clause, for example, authorizes Congress to regulate interstate commerce directly; it does not authorize Congress to regulate state governments’ regulation of interstate commerce.

New York, at 505 U.S. 166 cited with approval, Printz at 521 U.S. 924.
It is well established that state legislatures and their agencies are not subject to federal direction. Printz, at 521 U.S. 912; New York, 505 U.S. 144. In this case, state law is not inconsistent with federal law and the federal government has not occupied the field. The Petitioners’ position is that the federal law by virtue of its existence alone requires the Commission to assert jurisdiction over the contents of a price list that the state legislature specifically mandated it should not regulate. They are wrong. The FCC simply cannot empower the Commission to do what the legislature expressly removed from its authority. In this case, the Commission has no authority to regulate the contents of this Price List.
b. State law limits this Commission’s authority to regulate or invalidate price lists for Title 62 services.
In 1988, the state legislature decided to allow Title 61 regulated local exchange carriers (LECs) to “elect to exclude its telecommunication services, other than basic local exchange service . . . from regulation pursuant to title 61, Idaho Code . . . .” Idaho Code § 62-616. The Commission’s traditional regulatory authority is found in Title 61 of the Idaho Code. The Idaho Telecommunications Act of 1988 added a new chapter to Title 62 of the Idaho Code and created a modified form of regulation for telephone companies providing other than basic local exchange services in Idaho. Basic local exchange service for residential and small business customers with five or fewer lines remains under the Commission’s Title 61ratesetting authority.
In March 1989, U S WEST (Qwest) elected to remove certain non-basic local services from the Commission’s Title 61 ratesetting authority, including the services and facilities at issue here. See Case No. MTB-T-89-1; Order No. 22552. This price list (“Price List”) which is at the heart of the Petitioners’ complaint is part of U S WEST’s (Qwest) Exchange and Network Catalog (commonly called the “Title 62 Catalog”) filed with the Commission in 1993 after that election. Therefore, these services are now subject to the Commission’s limited Title 62 jurisdiction and are, therefore, only partially regulated by the provisions of Title 62, Idaho Code. The Commission correctly found that the Commission has no statutory authority to regulate the prices for these services and can only hear complaints that U S WEST (Qwest) failed to follow its Price List. Idaho Code § 62-616. July Order at 5. The Petitioners have not challenged that ruling and the Commission should reaffirm it.
This Commission further found that the only way the Commission may review or order changes to the rates in the underlying Price List and rule that provisions in the Price List are void or illegal is if there is some other legal basis for the Commission to evaluate those terms. The Commission correctly found that where a price list is filed pursuant to Idaho Code § 62-606 and the services described therein are not regulated Title 61 services, potentially only two statutes may provide a basis for the Commission to directly investigate the provisions of a price list and require inappropriate provisions be changed – Idaho Code § 62-605(5) or Idaho Code § 62-615(1). The Commission appropriately ruled that neither empowers the Commission to directly investigate these provisions. July Order at 7-12. More particularly, the Commission ruled that Idaho Code § 62-615(1) does not operate in this instance to “enlarge the Commission’s authority by permitting it to directly regulate the pricing elements within the U S WEST (Qwest) Price List at issue and, ultimately, to order U S WEST (Qwest) to provide the dedicated facilities for free to Petitioners.” July Order at 12.
The Petitioners have not challenged this ruling either. The Commission should reaffirm this ruling.
II. The FCC TSR Wireless Order is legally incorrect.
Even if U S WEST (Qwest) had not elected to deregulate these services as permitted by state law, the Commission should reject the Petitioners’ assertions. The FCC’s TSR Wireless Order either “requires” an incumbent local exchange carrier (“ILEC”) to provide dedicated facilities to pagers without proper compensation or it “requires” state commissions to pass those costs on to ratepayers. The former is unconstitutional and the latter improperly interferes with the Commission’s authority to set rates for intrastate services and violates the Federal Telecommunications Act of 1934. The FCC simply does not have authority to preempt state commission approved tariffs establishing the prices and conditions for providing dedicated intrastate facilities like trunks and lines. See Louisiana, 106 S.Ct. 1890.
a. FCC TSR Wireless Order improperly intrudes on state commission authority to set rates by “requiring” the ratepayers to assume the costs U S WEST (Qwest) incurs in dedicating or building facilities for the use of the paging companies’ customers to interconnect with the its network.
The FCC suggests in its decision in response to the “takings” argument that “Defendants possess other options for recovering these costs, such as recovering these costs from the end users that originates [sic] the calls.” TSR Wireless Order at ¶36. In other words, the FCC “requires” those costs associated with interconnecting paging companies to an ILEC’s network be borne by the ratepayer – thus requiring the state commission to set rates which include those costs. This clearly violates the Telecommunications Act of 1934 because, in effect, the FCC is improperly dictating the “charges, . . , practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier.” See Louisiana, 106 S.Ct. 1890; 47 U.S.C. § 152(b).
There are several problems with the FCC’s rather cavalier approach to this issue. It ignores the fact that these are facilities that are “dedicated” to the exclusive use of the paging companies and their customers. The facilities are not part of the general network. Once those messages are delivered to the dedicated facilities (trunks, lines, etc.) they are in essence part of the paging company’s network. Moreover, the FCC’s logic could just as easily be applied to call aggregators or Internet service providers. Finally, it ignores the fact that the paging customers actually generate the traffic and the need for the dedicated facilities – not the general ratepayer. The FCC has no authority to decide that those ratepayers should bear the costs for providing lines or trunks to the paging companies for their exclusive use.
While Petitioners may argue that the FCC can preempt the Commission’s ratemaking authority in order to discharge its authority over the paging company’s interconnection with the ILEC’s network, a federal agency’s authority to preempt state law or agency rulings is limited.
a federal agency may preempt state law only when and if it is acting within the scope of its congressionally delegated authority. This is true for at least two reasons. First, an agency literally has no power to act, let alone preempt the validly enacted legislation of a sovereign State, unless and until Congress confers power upon it. Second, the best way of determining whether Congress intended the regulations of an administrative agency to displace state law is to examine the nature and scope of the authority granted by Congress to the agency.
Louisiana, 106 S.Ct. at 1901. In this case, the FCC is acting outside its statutory authority. The FCC TSR Wireless Order is inconsistent with the Federal Telecommunications Act of 1996 – namely 47 U.S.C. §§ 251(c) and 252 – and is, therefore, improper.
Sections 251 and 252 of the federal Act do not delegate authority to the FCC to direct that costs for interconnection be passed on to state ratepayers or that facilities be dedicated to the use of a paging company for free.
Section 251 requires ILECs like U S WEST (Qwest), to allow paging companies to interconnect directly or indirectly with its facilities and equipment and to establish reciprocal compensation for the transport and termination of traffic. 47 U.S.C. §§ 251(a)(1) and (b)(5). Reciprocal compensation is not at issue here; it is the purchase of facilities dedicated to the paging companies’ use – the network elements – that is central to the Petitioners’ position. Where interconnection requires dedication of certain facilities to advance interconnection, like here, the ILEC, U S WEST (Qwest), can fulfill its statutory obligation to allow interconnection in one of two ways. It can either allow the Petitioners to physically locate their own equipment necessary for interconnection at U S WEST’s (Qwest) premises or provide access to unbundled network elements. The price listed items apparently are those network elements necessary to allow the Petitioners to interconnect with U S WEST’s (Qwest) network and to receive messages from the U S WEST (Qwest) network to Petitioners’ customers. While the federal statute imposes an obligation on U S WEST (Qwest) to provide them access to facilities and equipment, contrary to the FCC TSR Wireless Order, it specifically does not require U S WEST (Qwest) to provide them for free.
. . . to provide, for the facilities and equipment of any requesting, interconnection with the local exchange carrier's network. . . on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with the terms and conditions of the [interconnection] agreement and the requirements of this section and section 252.

47 U.S.C. § 251(c)(2)(D) (emphasis added). Indeed, Congress cannot impose an obligation to make private property available for another’s use without compensation. Therefore, to the extent that the FCC is attempting to require ILECs to dedicate facilities for the pagers to use for free, the FCC is operating outside its statutory authority and is ignoring the clear language of 47 U.S.C. § 251(c)(2)(D). As the Supreme Court ruled, “An agency may not confer power upon itself. To permit an agency to expand its power in the face of a congressional limitation on its jurisdiction would be to grant to the agency power to override Congress.” Louisiana, 106 S.Ct. at 1902.
The items contained in the disputed Price List are those facilities and equipment necessary to allow the Petitioners to interconnect with the U S WEST (Qwest) network. Congress intended, as is constitutionally required, that these facilities and equipment be provided on “rates, terms, and conditions that are just, reasonable, and nondiscriminatory.” Congress did not say they should be provided free of charge. Certainly, Congress cannot and has not specifically authorized the Idaho Commission to impose interconnection responsibilities free of charge. Prices should be set in accordance with interconnection agreements negotiated or arbitrated between the ILEC and the party seeking interconnection pursuant to Section 252. See 47 U.S.C. § 251(c)(1). This duty to negotiate an agreement is critical and directly ties both Sections 251 and 252 of the federal Act together. Section 252 controls and limits both the FCC’s role and the Commission’s role with respect to the items (the prices of certain network elements) at issue in the Price List.
Congress made clear that once an ILEC like U S WEST (Qwest) receives a request for interconnection, services, or network elements pursuant to Section 251, it may negotiate and enter into a binding agreement with the requesting telecommunications carrier without regard to the standards set forth in subsections (b) and (c) of Section 251 or it may request arbitration or mediation. 47 U.S.C. § 252(a)(1). Such an agreement must include a detailed schedule of itemized charges for interconnection and each service or network element included in the agreement. The express statutory recognition of the right of ILECs and requesting LECs to vary from the terms found in 47 U.S.C. § 251(b) and (c) is inconsistent with the FCC TSR Wireless Order.
Moreover, the FCC TSR Wireless Order is inconsistent with its own rule, because it likewise exempts negotiated agreements from compliance with the requirements of 47 CFR Part 51. See 47 C.F.R. § 51.3. Both Congress (and the FCC) recognize that parties may negotiate terms, prices and conditions that do not comply with either the FCC rules or with the provisions of Section 251(b) or (c). Yet, the FCC TSR Wireless Order would in effect make the FCC rules stand alone, operate independently of an agreement and substitute for any agreement. Therefore, the FCC does not have the authority to preempt state actions or require the Commission to enforce an order that is arguably unlawful.
b. The FCC TSR Wireless Order raises significant constitutional problems.
Assuming the FCC has no authority to shift the costs for providing dedicated facilities to paging companies to ratepayers, the FCC TSR Wireless Order is constitutionally flawed. The United States Supreme Court has always recognized that there is a takings whenever government requires a property owner to allow his property to be occupied (i.e. dedicated to the use of another, as is required here) and does not allow the property owner to be justly compensated by the party occupying the property. See Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 435 (1982). It has never been the law that the fact the costs can be recouped from someone else negates the fact property has been taken. Otherwise, the Supreme Court in Loretto would have ruled there was no taking because the landlords could simply recover their costs from the renters!
Moreover, the FCC suggests that it is the party on the ILEC network who calls the paging customer’s pager number who induces the costs. But that ignores the reality that “but for” the paging company and its customers, those lines, switches and other facilities would not be required to be built or dedicated. It is the paging company’s customers that bring about the calls – not the other way around. “But for” the paging customer’s decision to have a pager, the customer calling the pager number would not have called the number and that caller’s message would not have been delivered to the trunks or lines dedicated to the paging company’s use. Furthermore, even though customer calls to numbers serviced by a CLEC, a call aggregator or delivered to an Internet service provider are similar in many ways, the fact is the FCC allows the ILEC to charge the CLEC, call aggregator or Internet service provider for the dedicated facilities used to transport and switch those calls to it.
Therefore, the FCC decision clearly violates the Fifth Amendment to the United States Constitution by requiring ILECs to dedicate a portion of their property for the use of another, the paging companies, without compelling the paging companies to pay for that use.
SUMMARY
The Petitioners’ Petition for Reconsideration should be denied.
Dated at Boise, Idaho, this day of August 2000.

________________________
Cheri C. Copsey
Deputy Attorney General

Staff: Joe Cusick

M:uswt9924_cc7
TSR Wireless, LLC v. U S WEST, Memorandum Opinion And Order, (adopted May 31, 2000 and released June 21, 2000), File Nos. E-98-13, E-98-15, 98-16, E-98-17, E-98-18.

“[T]he Laws of the United States ... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby.” Art. VI, cl. 2, United States Constitution.
See also Washington Water Power Co. v. Kootenai Environmental Alliance, 99 Idaho 875, 591 P.2d 122 (1979); United States v. Utah Power & Light Co., 98 Idaho 665, 570 P.2d 1353 (1977); Lemhi Tel. Co. v. Mountain States Tel. & Tel. Co., 98 Idaho 692, 571 P.2d 753 (1977); Arrow Transp. Co. v. Idaho Pub. Utils. Comm'n, 85 Idaho 307, 379 P.2d 422 (1963).

Although the Petitioners filed this as a Declaratory Judgment action, the parties did not follow the procedure prescribed for declaratory judgment actions. Therefore, the Commission should make clear in whatever final order is issued that this is treated as a complaint and only binding on the Petitioners.
“The commission shall have full power and authority to implement the federal telecommunications act of 1996, including, but not limited to, the power to establish unbundled network element charges in accordance with the act.” Idaho Code § 62615(1).
“(b) Exceptions to Federal Communications Commission jurisdiction. . . . . nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier, . . .” 47 U.S.C. § 152(b).

While the Supreme Court’s recent ruling in AT&T Corp. v. Iowa Utilities Board, 525 U.S. 366, 119 S.Ct. 721 (1999), modifies the ruling in Louisiana, it does not change the fundamental principle that federal agencies can only act within their statutory authority.
The agreement is then submitted to the state Commission for review and approval and the Commission’s involvement is strictly limited by Section 252. 47 U.S.C. § 252 (e)(1). The Commission may reject an agreement adopted by negotiation only if it finds that the agreement discriminates against a telecommunications carrier not a party to the agreement or implementation of the agreement is not consistent with the public interest, convenience and necessity. 47 U.S.C. § 252 (e)(2)(A). The Commission’s decision is not reviewable by the state courts. 47 U.S.C. § 252 (e)(4).

“To the extent provided in section 252(e)(2)(A) of the Act, a state commission shall have authority to approve an interconnection agreement adopted by negotiation even if the terms of the agreement do not comply with the requirements of this part.” 47 C.F.R. § 51.3.

In Loretto the Supreme Court struck down a New York law requiring landlords to permit cable television providers to install cable television wires on the landlords’ property upon the payment of a modest fee. The Court found the New York law constituted a taking because it caused a permanent, physical occupation of landlords’ property without just compensation.

COMMISSION STAFF BRIEF ON THE EFFECT
OF THE SUPREMACY CLAUSE -11-