United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 2, 1998 Decided January 5, 1999
No. 97-1633
City of Abilene, Texas, et al.,
Petitioners
v.
Federal Communications Commission and
United States of America,
Respondents
State of Texas, et al.,
Intervenors
Consolidated with
No. 97-1634
On Petitions for Review of an Order of the
Federal Communications Commission
James Baller argued the cause for petitioner. With him on
the briefs were Sean Stokes and Lana Meller.
James M. Carr, Counsel, Federal Communications Com-
mission, argued the cause for respondents. With him on the
brief were Joel I. Klein, Assistant Attorney General, U.S.
Department of Justice, Catherine G. O'Sullivan and Andrea
Limmer, Attorneys, Christopher J. Wright, General Counsel,
Federal Communications Commission, Daniel M. Armstrong,
Associate General Counsel, and John E. Ingle, Deputy Asso-
ciate General Counsel.
James D. Ellis, Patricia Diaz Dennis, David F. Brown,
Michael K. Kellogg, Geoffrey M. Klineberg, Durward D.
Dupre and Michael J. Zpevak were on the brief for interve-
nor Southwestern Bell Telephone Company. Robert M.
Lynch entered an appearance.
Elizabeth R. Sterling, Assistant Attorney General, was on
the brief for intervenor State of Texas.
Jeffrey L. Sheldon and Sean A. Stokes were on the briefs
for intervenor UTC, The Telecommunications Association.
Before: Randolph, Rogers, and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Randolph.
Randolph, Circuit Judge: The State of Texas has a law
prohibiting its municipalities from providing telecommunica-
tions services. The United States has a law against state
statutes that bar "any entity" from this line of business. If a
Texas municipality is "any entity," the Supremacy Clause,
U.S. Const. art. VI, cl. 2, would render the Texas law a
nullity, or so it is claimed. In legal parlance, the federal law
would "preempt" the state law. The question here is whether
the Federal Communications Commission, which administers
the federal law, rightly decided that the Texas law is not
preempted.
The west-central Texas city of Abilene, population 106,000,
convened a task force to study the city's technological
"needs." The task force believed Abilene's businesses and
residents should have "two-way audio, video and data trans-
mission capabilities." According to the city, the local ex-
change company is unwilling to upgrade its system for this
purpose. The city wants to fill the gap, or at least wants to
consider doing so. A Texas statute stands in the way. It
requires those seeking to provide local exchange telephone
service, basic local telecommunications service, or switched-
access service to obtain a particular type of certificate. See
Texas Public Utility Regulatory Act of 1995 s 3.251(c) (codi-
fied at Tex. Util. Code Ann. ss 54.001, 54.201-.202 (West
1998) ("Texas Utility Act").1 This 1995 Texas law also ren-
ders municipalities ineligible for the certificates and forbids
them from selling, "directly or indirectly," telecommunica-
tions services to the public. Id. s 3.251(d).
Thwarted on the State front, the city of Abilene turned to
the Federal Communications Commission. The city peti-
tioned for a declaratory ruling that a provision in the Tele-
communications Act of 1996, Pub. L. No. 104-104, 110 Stat.
56, preempted the Texas law. The provision--s 253(a)--is as
follows: "No State or local statute or regulation, or other
State or local legal requirement, may prohibit or have the
effect of prohibiting the ability of any entity to provide any
interstate or intrastate telecommunications service." 47
U.S.C. s 253(a).2 The Commission denied the petition on the
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1 Until 1997, these portions of the Texas Utility Act were
codified at Tex. Rev. Civ. Stat. Ann. art. 1446c-0 (West Supp. 1996).
2 In its entirety, s 253 provides:
(a) No State or local statute or regulation, or other State or
local legal requirement, may prohibit or have the effect of
prohibiting the ability of any entity to provide any interstate or
intrastate telecommunications service.
(b) Nothing in this section shall affect the ability of a State
to impose, on a competitively neutral basis and consistent with
section 254 of this section, requirements necessary to preserve
and advance universal service, protect the public safety and
welfare, ensure the continued quality of telecommunications
services, and safeguard the rights of consumers.
(c) Nothing in this section affects the authority of a State or
local government to manage the public rights-of-way or to
ground that Congress, in using the word "entity" in s 253(a),
had not expressed itself with sufficient clarity to warrant
federal interference with a State's regulation of its political
subdivisions. See In re: Public Util. Comm'n of Texas, 13
F.C.C.R. 3460, 3547 (1997). The city, joined by the American
Public Power Association, petitioned for judicial review. Oth-
er parties intervened for and against the city's position.
In deciding this case we shall assume arguendo that Con-
gress, acting within its constitutional authority, may--
through the Supremacy Clause--supersede a State law limit-
__________
require fair and reasonable compensation from telecommunica-
tions providers, on a competitively neutral and nondiscriminato-
ry basis, for use of public rights-of-way on a nondiscriminatory
basis, if the compensation required is publicly disclosed by such
government.
(d) If, after notice and opportunity for public comment, the
Commission determines that a State or local government has
permitted or imposed any statute, regulation, or legal require-
ment that violates subsection (a) or (b) of this section, the
Commission shall preempt the enforcement of such statute,
regulation, or legal requirement to the extent necessary to
correct such violation or inconsistency.
(e) Nothing in this section shall affect the application of
section 332(c)(3) of this title to commercial mobile service
providers.
(f) It shall not be a violation of this section for a State to
require a telecommunications carrier that seeks to provide
telephone exchange service or exchange access in a service
area served by a rural telephone company to meet the require-
ments in section 214(e)(1) of this title for designation as an
eligible telecommunications carrier for that area before being
permitted to provide such service. This section shall not
apply-
(1) to a service area served by a rural telephone company
that has obtained an exemption, suspension, or modification of
section 251(c)(4) of this title that effectively prevents a competi-
tor from meeting the requirements of section 214(e)(1) of this
title; and
(2) to a provider of commercial mobile services.
ing the powers of the State's political subdivisions. We put
the matter in terms of limiting a municipality's powers be-
cause in Texas "home rule" cities like the city of Abilene,
although deriving their powers from the state constitution,
are subject to state legislative restrictions on those powers.
See Tex. Const. art. XI, s 5; see also Lower Colorado River
Auth. v. City of San Marcos, 523 S.W.2d 641, 643-44 (Tex.
1975); Zachry v. City of San Antonio, 296 S.W.2d 299, 301
(Tex. Civ. App. 1956), aff'd, 305 S.W.2d 558 (Tex. 1957).
Whatever the scope of congressional authority in this regard,
interfering with the relationship between a State and its
political subdivisions strikes near the heart of State sover-
eignty. Local governmental units within a State have long
been treated as mere "convenient agencies" for exercising
State powers. See Sailors v. Board of Educ., 387 U.S. 105,
107-08 (1967); see also Wisconsin Pub. Intervenor v. Morti-
er, 501 U.S. 597, 607-08 (1991). And the relationship between
a State and its municipalities, including what limits a State
places on the powers it delegates, has been described as
within the State's "absolute discretion." Sailors, 387 U.S. at
107-08.
For these reasons, we are in full agreement with the
Federal Communications Commission that s 253(a) must be
construed in compliance with the precepts laid down in Grego-
ry v. Ashcroft, 501 U.S. 452 (1991). To claim, as the city of
Abilene does, that s 253(a) bars Texas from limiting the
entry of its municipalities into the telecommunications busi-
ness is to claim that Congress altered the State's governmen-
tal structure. Gregory held that courts should not simply
infer this sort of congressional intrusion: "States retain sub-
stantial sovereign powers under our constitutional scheme,
powers with which Congress does not readily interfere." 501
U.S. at 461. Like the Commission, we therefore must be
certain that Congress intended s 253(a) to govern State-local
relationships regarding the provision of telecommunications
services. This level of confidence may arise, Gregory in-
structs us, only when Congress has manifested its intention
with unmistakable clarity. See 501 U.S. at 460. Federal law,
in short, may not be interpreted to reach into areas of State
sovereignty unless the language of the federal law compels
the intrusion.3
Section 253(a) fails this test. The first thing one notices
about the provision is the oddity of its formulation. It
invalidates State laws that "prohibit" an entity's "ability" to
do something, namely, to provide telecommunications ser-
vices. This sounds strange because one would not have
supposed that an entity's "ability" to furnish these services
turned on a State's permission. That aside, the question
remains whether the category of those whose "ability" may
not be impinged by State law--"any entity"--includes munici-
palities. To place municipalities in that category would be to
protect them from State laws restricting their governmental
activities. In contending that s 253(a) has this effect, Abilene
thinks it important that the provision places the modifier
"any" before the word "entity." If we were dealing with the
spoken word, the point might have some significance, or it
might not, depending on the speaker's tone of voice. A
speaker, by heavily emphasizing the "any" in "any entity,"
might be able to convey to his audience an intention to
include every conceivable thing within the category of "enti-
ty." But we are dealing with the written word and we have
no way of knowing what intonation Congress wanted readers
to use. All we know is that "entity" is a term Congress left
undefined in the Telecommunications Act.4 The term may
include a natural person, a corporation, a partnership, a
limited liability company, a limited liability partnership, a
trust, an estate, an association. See Alarm Indus. Communi-
cations Comm. v. FCC, 131 F.3d 1066 (D.C. Cir. 1997).
Abilene maintains that it is also linguistically possible to
include a municipality under the heading "entity."5 But it is
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3 We made a similar point in Commonwealth of Virginia v.
EPA when we wrote that a court "would have to see much clearer
language to believe a statute allowed a federal agency to intrude so
deeply into state political processes." 108 F.3d 1397, 1410 (D.C.
Cir. 1997), partial reh'g granted, 116 F.3d 499 (D.C. Cir. 1997).
4 Abilene cites only sections of the Telecommunications Act
defining terms other than "entity." See Petitioners' Brief at 31.
5 But see Sailors, 387 U.S. at 107 (quoting Reynolds v. Sims,
377 U.S. 533, 575 (1964)): "Political subdivisions of States--coun-
not enough that the statute could bear this meaning. If it
were, Gregory's rule of construction would never be needed.
Gregory's requirement of a plain statement comes into play
only when the federal statute is susceptible of a construction
that intrudes on State sovereignty. Other than the possibility
just mentioned, Abilene offers nothing else, and certainly no
textual evidence, to suggest that in using the word "entity,"
Congress deliberated over the effect this would have on
State-local government relationships or that it meant to au-
thorize municipalities, otherwise barred by State law, to enter
the telecommunications business.
Abilene points out that s 253 contains two other subsec-
tions explicitly restricting the scope of preemption and pre-
serving State regulatory authority over telecommunications
services. See 47 U.S.C. s 253(b), (c). From this, it draws
the conclusion that Congress meant to reserve to the States
only very narrow powers. We think the opposite conclusion
follows. The two subsections--s 253(b) and (c)--set aside a
large regulatory territory for State authority. States may act
to preserve and advance universal service, protect the public
safety and welfare, ensure the continued quality of telecom-
munications services, safeguard the rights of consumers, man-
age the public rights-of-way, and require fair and reasonable
compensation from telecommunications providers for use of
public rights-of-way. See 47 U.S.C. s 253(b), (c). In any
event, the fact that Congress, in other parts of s 253, ex-
pressly reserved certain powers to the States does not make
s 253(a) into the sort of clear expression Gregory requires for
congressional interference with a State's regulation of its
political subdivisions.
Abilene tells us that Congress "would surely have inserted
the word 'private' between 'any' and 'entity' in Section 253(a)"
if it had not wanted to limit the power of States over their
local units. Petitioners' Brief at 32. The argument is mis-
taken. Any statute failing the Gregory standard, that is, any
statute not clearly including matters within the core of State
__________
ties, cities or whatever--never were and never have been consid-
ered as sovereign entities."
sovereignty, could be rewritten to exclude those matters.
The question Gregory addresses is what to do when the text
fails to indicate whether Congress focused on the effect on
State sovereignty. Gregory's answer is--do not construe the
statute to reach so far.6
Abilene cites two previous Commission decisions as if these
could alter the analysis Gregory demands.7 In re: IT&E
Overseas, Inc., 7 F.C.C.R. 4023 (1992), did not concern federal
preemption of traditional state powers. It involved an at-
tempt by Guam, a U.S. territory, to exercise traditional
federal powers by asserting jurisdiction over interstate and
foreign common carrier communications. See 7 F.C.C.R. at
4023. To ensure that Guam did not usurp the Commission's
exclusive authority to regulate, the Commission construed the
term "any corporation" as used in another provision of the
Communications Act of 1934, 47 U.S.C. s 153, to include
public corporations such as Guam's publicly-owned telephone
company. See 7 F.C.C.R. at 4025. That decision furthered
Congress's clearly expressed intent in 47 U.S.C. s 151 to
"centraliz[e] authority . . . with respect to interstate and
foreign commerce in wire and radio communication" in one
federal agency (the Commission). In contrast, Congress did
not express any clear intent in s 253(a) to transfer to the
Commission the states' traditional power to regulate their
subdivisions. Nor is the Commission's interpretation of "enti-
ty" inconsistent with its decision in In re: Classic Telephone,
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6 In deciding whether the Age Discrimination in Employment
Act of 1967 ("ADEA") preempted a Missouri law requiring certain
judges to retire at age seventy, Gregory made the point this way:
"in this case we are not looking for a plain statement that judges
are excluded [from the ADEA's coverage]. We will not read the
ADEA to cover state judges unless Congress has made it clear that
judges are included." 501 U.S. at 467.
7 In a brief, one-paragraph appeal to "legislative history" con-
sisting of a committee report and two post-enactment letters from
Members of Congress, Abilene fails to acknowledge that the state-
ments it quotes deal with an issue not before us--whether public
utilities are entities within s 253(a)'s meaning. See Petitioners'
Brief at 33, 15-17.
Inc., 11 F.C.C.R. 13,082 (1996). There, the Commission
overrode the refusals of two Kansas municipalities to grant
telephone franchise applications to Classic Telephone, Inc.
See 11 F.C.C.R. at 13,083. The Kansas cities were violating
s 253(a) by banning entry to all but one local telephone
service provider. See 11 F.C.C.R. at 13,095-97. The case is
not at all comparable to the one before us. The Texas Utility
Act restricts all municipalities from providing telecommunica-
tions services. The question here is whether s 253(a) re-
lieves municipalities from this restriction. Section 253(a)
could have this affect only if a municipality were considered
an "entity." Classic Telephone has nothing to say on this
subject.
No useful purpose would be served by setting forth Abi-
lene's other arguments. We have considered and rejected
them. The critical point is that it was not plain to the
Commission, and it is not plain to us, that s 253(a) was meant
to include municipalities in the category "any entity." Under
Gregory, the petition for judicial review must therefore be
denied.
So ordered.