Local Government, Federalism, and the Telecommunications Revolution

• Author: Roger Richman
• Published date: 01 August 2002
• Date: 01 August 2002
• DOI: http://doi.org/10.1177/0160323X0203400206
• Subject Matter: Practitioner's Corner

State and Local Government Review
Vol. 34, No. 2 (Spring 2002): 133–44
PRACTITIONER’S CORNER
Local Government, Federalism, and the
Telecommunications Revolution
Roger Richman
No State or local statute or regulation or other State or local legal require-
ment may prohibit or have the effect of prohibiting the ability of any en-
tity to provide any interstate or intrastate telecommunications service.
—Federal Telecommunications Act, 1996, §253(a)
SECTION 253(a) of the Federal Tel- F.3d 871 [9th Cir. 2000]). Parts of municipal
ecommunications Act (FTA) is a
telecommunications ordinances requiring tel-
powerful assertion of federal author-
ecommunications companies to file informa-
ity over state and local governments. Under the
tion concerning their finances, ownership, and
act, Congress determined that, with limited
service plans with the local government have
exceptions, the national interest in promot-
been struck down (e.g., AT&T Communications
ing new telecommunications services over-
of the Southwest v. City of Dallas, 8 F.Supp.2d
rides state and local interests and policy con-
582 [1998]).
cerns. The statute offers a clear statement of
Similarly, the Federal Communications Com-
federal supremacy in telecommunications reg-
mission (FCC) overturned a state agency’s de-
ulation that has been liberally applied by fed-
cision to contract with a single supplier to
eral courts in overturning state and local de-
provide telecommunications services along its
cisions on subjects traditionally committed to
state highway rights-of-way. The federal tele-
local discretion. Citing the FTA’s authoriza-
communications regulatory agency held in
tion for preemption of state and local author-
the case that the state agency created a “bar-
ity, federal courts have reversed local govern-
rier to competition” by not contracting with
ment decisions rejecting the location of large
multiple telecommunications service providers
wireless antenna towers in residential neigh-
(FCC 1999). One commentator has suggested
borhoods (Omnipoint Communications Enter-
that Section 253 of the FTA may be com-
prises v. Newtown Township, Pa., 219 F.3d 240
pared to a regulatory “taking” of public prop-
[3rd Cir. 2000]). Moreover, the courts have de-
erty by the federal government when it is used
nied cities the right to require that cable op-
to prevent states and municipalities from reg-
erators, as a condition of a municipal fran-
ulating the use of their own streets and rights-
chise, agree to offer customers “open access”
of-way as they see fit under state law (Wors-
to the Internet (AT&T v. City of Portland, 216
tell 1998, 441).
Spring 2002
133

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Richman
This article explores recent judicial opin-
changes in federal oversight of the cable tele-
ions concerning local government authority
vision and wireless communications indus-
to regulate emerging telecommunications ser-
tries. As described in a congressional confer-
vices that use locally owned public rights-of-
ence committee report, the act’s purpose was
way for their operations or that require land-
to “provide for a pro-competitive, deregulatory
use approvals from local officials (e.g., the case
national policy framework designed to accel-
of wireless antenna tower-siting decisions).
erate rapidly private sector deployment of ad-
Parties in these cases generally agree that the
vanced telecommunications and information
FTA authorizes state and local government to
technologies and services to all Americans by
minimally manage access to public rights-of-
opening all telecommunications markets to
way in order to protect public safety and wel-
competition” (U.S. House of Representatives
fare and to charge telecommunications compa-
1996, 206). “Pro-competitive,” “deregulation,”
nies nominal fees in compensation for actual
and “accelerate private sector deployment” re-
governmental costs of managing physical access
cur throughout the act and compose its cen-
to public rights-of-way (FTA 1996, §253[c]).
tral theme.
Beyond these basic understandings about a
The 1996 act accomplished its purposes pri-
limited scope for state or local regulation, how-
marily by limiting state and local government
ever, consensus deteriorates, and legal disputes
control over the provision of telecommunica-
arise concerning the limits of local authority.
tion services. The FTA includes major sec-
As general-purpose governments, munici-
tions deregulating local telephone services and
palities that routinely regulate utilities argue
removing “barriers to entry” to new competi-
that they have ample powers (e.g., the police
tors offering telecommunications services. The
power and the franchise power) to regulate the
following sections review some of the key pro-
local operations and local impacts of telecom-
visions of the new statute and court decisions
munications providers as commercial entities
affecting state and local governments.
within their communities. The telecommuni-
cations industry and the FCC have vigorously
Who’s in Charge of Local Telephone
opposed that idea, basing their arguments on
Deregulation?
the FTA’s call for deregulation of the indus-
To introduce competition into local telecom-
try to remove “barriers to entry” in the provi-
munications markets, the FTA mandated the
sion of emerging telecommunications services
breakup of local telephone company monop-
across the country (FTA 1996, §253 [a][d]).
olies, which had been the bedrock of local
The cases reviewed in this article address
telephone service in the United States since
the tension between historical preferences for
the early 20th century. They had been pro-
local control of land-use decision making and
local government control over public rights-
tected from competition and closely regulated
of-way and the national interest in deregula-
by state public utilities commissions to ensure
tion of telecommunications services adopted
that a single dominant local “exchange” would
as national policy in the FTA. The subtext
create local “public switched” networks that
of these cases is federalism and the blend of
would efficiently connect all local calls and
highly centralized regulation and preemption
connect to long-distance services. As closely
that characterize FCC interactions with local
regulated monopolies, local telephone com-
governments since passage of the FTA.
panies were amenable to regulatory objectives
promoting broad public interest objectives like
“universal service” at affordable rates.1
The Federal Telecommunications
The FTA changed the basic premise of reg-
Act and State and Local Government
ulated local telephone service by requiring lo-
The FTA restructured the local telephone in-
cal telephone monopolies to “unbundle” their
dustry in the United States and instituted
services (e.g., separately pricing dial tone,
134
State and Local Government Review

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Local Government and the FTA
switching services, customer information, etc.)
the reach of federal authority into state gov-
and make them available to competitors for
ernance of local telephone services, altering
resale to the public at competitive prices (FTA
the balance of state and federal authority that
1996, §251[c]). The unbundling requirement
had been accepted since the original 1934
in the law was, in effect, a federal order to
Communications Act (Weiser 2000, 822).
state public utilities commissions to break up
The impact of federal court decisions has
local telephone exchange service monopolies
been to hasten deregulation of local telephone
(Jorde, Sidak, and Teece 2000, 1) and to re-
services around the country. Local govern-
orient their agencies from traditional “com-
ments soon began to experience the effects of
mand-and-control” regulation to promoting
deregulation under the FTA. Rather than deal-
deregulation and competition (Weiser 2000,
ing with a single, dominant local telephone
820). State commissions were required to
company, cities and counties began to face
abandon conventional public service regula-
challenges of dealing with a number of local
tion and to replace regulation with new strat-
telephone service providers and problems cre-
egies facilitating entry of new competitors into
ated by new telecommunications providers
what had been local monopolies (Rowe 2000,
building fiber optic networks in their jurisdic-
880). The restructuring and reorienting chal-
tions. New issues surfaced involving access to
lenge to these traditional, powerful state agen-
public rights-of-way and the application of
cies has been daunting.
municipal franchises to new telecommunica-
Following passage of the FTA in 1996,
tions services (Miller, Lowery, and Van Eaton
state public utilities commissions challenged
2000, 659). Local governments that previ-
FCC orders to unbundle local services. State
ously had relied on state public utilities com-
commissions contended that they were agen-
missions to regulate local telephone services
cies of sovereign states and that—in accord
were suddenly confronted with multiple pro-
with principles of federalism and traditional
viders of local telephone services within their
practice in telephone regulation—states should
communities and with cable operators and
be the ultimate regulatory authority over lo-
other telecommunications companies aggres-
cal and intrastate telephone services. In 1999,
sively competing within their jurisdictions. As
in its first analysis of the balance of federal and
local governments began to deal with the im-
state authority under...