California Wireless Fight Could Go to Court, With State Authority Impact

Recent T-Mobile spats with the California Public Utilities Commission might portend litigation over state wireless authority, said law experts in interviews last week. A potential federal case on whether California is preempted under Section 332 of the Communications Act would likely affect other states' roles in big transactions and other issues, they said.

The CPUC commission rejected T-Mobile’s argument last month that the agency lacks authority to review its Sprint buy, with the agency imposing conditions beyond what the carrier volunteered (see 2004160054). In comments in that docket and separately to challenge a CPUC backup power proposal, T-Mobile argued the state was preempted under the federal Section 332(c)(3), as amended by the 1993 Omnibus Budget Reconciliation Act. The section says states retain jurisdiction over commercial mobile radio service terms and conditions, but not rates or market entry. Some CPUC attorneys recently predicted litigation over that distinction (see 2004170059)

Disagreements could foreshadow litigation about wireless authority, said Boston College Law School professor Daniel Lyons: “No court has ever explicitly addressed the issue of whether state PUCs can regulate wireless mergers.” If T-Mobile and the CPUC go to court over the decision and California loses, the ruling could set a federal precedent that the Communications Act preempts state reviews of wireless transactions, he said.

T-Mobile might decide a challenge isn’t worth it, but “a ticking time bomb in the CPUC decision is the enforcement mechanism,” said Lyons, a Free State Foundation Academic Advisors board member who wrote an FSF paper on the subject. “If T-Mobile makes a good faith effort but because of COVID or whatever ends up not fulfilling those obligations, you could see the fight at that point about whether the CPUC has the authority to enforce those conditions.” T-Mobile’s legal argument doesn’t hold up as well in the disaster resiliency context, Lyons said.

It’s part of ongoing “legal warfare” about state preemption, said Indiana University Media School professor Barbara Cherry. Wireless carriers may argue unfavorable state policies are rate regulation preempted by the act in their larger effort to win total preemption of states, she said. It’s their “next strategy” after failing to convince the U.S. Court of Appeals for the District of Columbia Circuit that the FCC net neutrality order immediately preempts all state laws, she said. States have police power to preserve public health and safety under the Constitution, and the 1993 law retained some wireless authority for states, she said.

California is a logical venue for a state preemption fight because a court decision about the large, “bellwether” state would likely have wide ramifications for elsewhere, said Cherry. One risk for industry is that California’s size gives it more legal resources, she said.

“It is tough to see this not heading to litigation,” emailed Wilkinson Barker lawyer Raymond Gifford, former Colorado Public Utilities Commission chair. “Certain states, and California in particular, have chafed under federal law supremacy over communications (and broadband and wireless). They continue to nibble around the edges, or in the case of merger and backup power mandates, defiantly go to the core of what is a federal issue.”

“T-Mobile and the CPUC will eventually face off in federal court,” emailed Tellus Venture Associates President Steve Blum. The CPUC published its T-Mobile/Sprint decision Monday, starting a 30-day shot clock for rehearing applications that would expire May 27.

"T-Mobile is correct that states cannot regulate wireless entry and rates," but "that preemption does not extend to state review of merger transactions such as the one presented in the T-Mobile/Sprint case," emailed a CPUC spokesperson. The commission wrote in its T-Mobile/Sprint decision that legislative history of Section 322(c)(3) shows Congress meant to include transfer of control in the "other terms and conditions" area of jurisdiction retained by states.

T-Mobile declined comment. CTIA didn’t comment.