Nixon (Missouri), et al. v. Missouri Municipal League / FCC v. Missouri Municipal League / Southwestern Bell Telephone v. Missou

Questions presented: Whether 47 U.S.C. 253(a), which provides that "[n]o State ... regulation ... may prohibit ... the ability of any entity to provide any interstate or intrastate telecommunications service," preempts a state law prohibiting political subdivisions of the state from offering telecommunications service to the public?

BY MERYL CONANT, MEDILL NEWS SERVICE

It's hard to believe that two little, seemingly innocuous, words could spawn such voluminous debate. However, this is exactly what happened when Congress chose the phrase "any entity" to identify providers of telecommunications services.

In 1996, Congress passed the Telecommunications Act, which stated that no state law could prevent "the ability of any entity to provide any interstate or intrastate telecommunications service." The Act dictated that if such a statute did exist, the Federal Communications Commission had the power to preempt it. In other words, if a state law prevented "any entity" from supplying telecommunications services, the FCC was empowered to strike it down and assert the dominance of the federal act.

In 1997, the Missouri legislature passed a statute that prohibited political subdivisions of the state from providing telecommunications services. Under the law, local municipalities in Missouri could not provide advanced telecommunications services, such as telephone or internet services. For example, Missouris law prohibited Springfield from providing hospitals and schools with telecommunications services across the fiber optics it already had in place, even though Southwestern Bell was not providing these services, according to William Andrew Dalton, general counsel for the City Utilities of Springfield.

The Missouri Municipal League, representing the cities of Springfield, Columbia and Sikeston, in conjunction with the Missouri Association of Municipal Utilities and American Public Power Association, which represents utilities operated by municipalities across the country, questioned the legality of barring municipalities from providing such services. They petitioned the FCC to preempt Missouri's law as a violation of the 1996 Act.

In its decision, the FCC found that Missouri's law did not conflict with the federal statute. However, the FCC did discourage other states, eleven of which already had similar laws in place, from completely barring municipalities from participating in telecommunications. Although the FCC encouraged less restrictive policies, it wrote that its hands were tied by Supreme Court precedent. In Gregory v. Ashcroft, the Supreme Court in 1991 held that if Congress intended a federal law to preempt state laws, its wording must be explicitly and unambiguously stipulated. That requirement is called the Gregory rule.

The Missouri Municipal League and its co-plaintiffs appealed to the 8th Circuit Court of Appeals. Their brief insisted that "any entity" is an "expansive, unrestricted" term that undoubtedly includes municipalities. It said that the courts "must give the word or phrase modified its broadest possible scope, unless a narrower construction is compelled in other language in the statute or its legislative history."

"Congress, in our opinion, said that [the telecommunications market] has to be open to competition, it has to be open to competition for everyone everywhere, including municipalities," said Richard Geltman, general counsel for the American Public Power Association.

They argued that the debate was not only about two words, but involved a greater public policy issue. Since private telecommunication companies may not be adequately prepared to provide more rural or thinly-populated areas with advanced service, they argued, many organizations or individuals may have to live without these services.

"Centuries ago the private sectors left much of the city in the dark, literally. Thousands of communities were being left behind," said James Baller, the Municipal Leagues head counsel. "The same sort of pattern emerged in the communications area, where the economic incentive for the private sector was to go to the most densely populated areas. But many cities, the very ones that were left behind a century ago, ironically, had it happen again.

"I take this controversy out of the fight over two words in the statute and look at the bigger picture," Baller explained. "I think you can understand the frustration of communities who are being told to cool their heels while the private sector decides what and where it will provide them with advanced communication services that they want now."

In August, 2002, a unanimous 8th Circuit panel sided with the Missouri Municipal League and ruled that the Telecommunications Act should preempt the Missouri law.

"The dispute hinges on the meaning of the phrase 'any entity' in section 253 of the Act. More precisely, do the words 'any entity' plainly include municipalities and so satisfy the Gregory plain-statement rule? We hold that they do," wrote Judge Roger Wollman. "Congress need not provide specific definitions for each term in a statute where those terms have a plain, ordinary meaning and Congress uses an expansive modifier to demonstrate the breadth of the statute's application."

In so holding, the 8th Circuit panel conceded that its opinion conflicted with a 1999 opinion by the Court of Appeals for the District of Columbia in City of Abilene v. FCC, a case involving a Texas statute very similar to the Missouri one.

The state of Missouri and Southwestern Bell joined the FCC in seeking review by the U.S. Supreme Court. They argued that the 1996 Act intended to foster competition between private telecommunication sectors and not make them compete with municipalities, which they claimed would innately have unfair advantages over private companies. They also argued that since the Act's wording was ambiguous, it cannot be assumed that Congress would favor preemption in this instance, which would usurp the states power to regulate its own subdivisions. In its brief, the state of Missouri expressed concern that if the balance of power shifted in this way, Congress would gain power over many of the "essential functions of the states."

In addition, the FCC reiterated in its petition that the Missouri statute did not reach the high level of clarity that was dictated by the Supreme Court in its Gregory opinion.

The case has attracted numerous "friend of the court" briefs on both sides. More than ten briefs, mostly by national organizations, such as the High Tech Broadband Coalition and Educause, were filed in support of the Missouri Municipal League; on the other side supporting the Missouri statue were mostly private telephone companies, such as US Telecommunications Association, Sprint Communications, and Sprint.

On June 23, 2003, the Court accepted review in the case, consolidated the three cases and allotted one hour for oral argument.

On March 24, 2004, the Court sided with the state of Missouri, holding 8-1 that the class of entities contemplated by section 253 does not include the state's own subdivisions, so as to affect the power of states and localities to restrict their own delivery of telecommunications services. Justice David Souter's majority opinion allows states like Missouri to prohibit local governments from offering commercial telephone services to the public, if, for instance, the state wants to prevent municipalities from having an unfair advantage as competitors to private telecommunications providers.

Justice John Paul Stevens was the lone dissenter.

Attorneys: For Nixon (State of Missouri):Ronald Stephen Louis MolteniAssistant Attorney GeneralP. O. Box 899Jefferson City, MO 65102573-751-3321For FCC & U.S.:THEODORE B. OLSONSolicitor General, Counsel of RecordR. HEWITT PATEActing Assistant Attorney GeneralPAUL D. CLEMENTDeputy Solicitor GeneralJAMES A. FELDMANAssistant to the Solicitor GeneralCATHERINE G. O'SULLIVANANDREA LIMMER