For ruling on 5G regulations, 9th circuit turns to payphones

The 9th U.S. Circuit Court of Appeals this month applied the standard from one of the oldest communications devices -- payphones -- to largely uphold the Federal Communications Commission's preemptions of local regulations for emerging 5G wireless technology. The FCC's "material inhibition" standard was established in a 1997 order reviewing a local regulation that restricted the placement of pay phones on private property outdoors. The FCC held that the regulation did not materially inhibit payphones because they could be placed indoors on private property and indoors or outdoors on public property. California Payphone Association, 12 FCC Rcd. 14,191 (1997).

The 9th Circuit reaffirmed the material inhibition standard, but noted that it applies differently for 5G because the technology requires rapid widespread deployment of small cell antennas, and therefore state and local regulation, particularly with respect to fees and aesthetics, "is more likely to have a prohibitory effect on 5G technology than it does on older technology." City of Portland v. U.S., 2020 DJDAR 8518 (Aug. 12, 2020). In other words, in the FCC's view, it takes less to materially inhibit 5G than it would to materially inhibit payphones.

In California Payphone, it was permissible for a local regulation to bar placement of a payphone outside -- the very place where the phone would be most useful. Twenty years ago, when people actually used payphones, what good would it do for a payphone to be installed inside a locked, private building if a driver's car breaks down in the middle of the night and he needed to call for help?

Yet the FCC held that it would materially inhibit, or discriminate against, 5G if a municipality imposed aesthetic regulations that required wireless antennas to blend into the character of a neighborhood. The FCC's Small Cell Order issued in 2018 barred aesthetic regulations as an impermissible material inhibition for wireless antennas unless the regulations are (1) reasonable, (2) no more burdensome than requirements placed on other facilities, and (3) objective and published in advance. Small Cell Order. Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Inv., 33 FCC Rcd. 9088 (2018) ¶86 (released Jan. 4, 2018).

That was a leap too far for the 9th Circuit, and it vacated the FCC's standard. The FCC's statutory authority for limiting local regulation of wireless technology is set forth in Section 332(c)(7) of the Telecommunications Act. "The regulation of the placement, construction, and modification of personal wireless service facilities by any State or local government ... shall not prohibit or have the effect of prohibiting the provision of personal wireless services." 47 U.S.C. Section 332(c)(7)(B)(i)(II).

However, the 9th Circuit held that when Congress enacted Section 332 of the Federal Telecommunications Act, it left open the ability of local jurisdictions to enact aesthetic regulations on a situational basis. The court noted that Congress "sought to preserve state and local governments' 'flexibility to treat facilities that create different ... aesthetic. ... concerns differently, ... even if those facilities provide functionally equivalent services.'"

Requiring that regulations for 5G be no more burdensome than regulations for any other type of infrastructure deployments is the wrong comparison and exceeded the FCC's authority in the view the court. Instead, the comparison should be between 5G with functionally equivalent infrastructure deployments.

But what exactly are functionally equivalent facilities to 5G? The court notes that 5G service supports faster speeds, but covers shorter distances, leading to the need for a larger number of antennas. So it seems that 5G necessarily has a more pronounced aesthetic effect than traditional telecom facilities simply because of the volume.

One example of permissible discrimination in the context of incumbent telecom carrier rates is volume discounts. If a telecom carrier can show that the cost of providing service to a high volume customer is less than a low volume customer, then offering the high volume customer a lower per-unit price is permissible.

If volume is a valid basis for distinguishing among rates and terms then it may be a valid basis for distinguishing among facilities. It appears local jurisdictions can address the aesthetic effect of the sheer volume of antennas required to support full-fledged 5G service. This is especially true because 5G antennas are being installed not just in commercial areas, but deep into residential neighborhoods as well.

The 9th Circuit's opinion appears to give cities grounds to require cellular carriers to take steps to minimize the aesthetic impact of large numbers of antennas, and to do so on a situational basis. That would mean, for example, that the FCC cannot preempt, per se, local jurisdictions that apply differential requirements to wireless antennas placed in different areas within a city based on the characteristics of that area.

"The FCC's position that all subjective aesthetic regulations constitute a per se material inhibition must therefore be viewed with considerable skepticism."

"This conclusion, that all subjective standards are without public benefit and address no public harm, is unexplained and unexplainable." The 9th Circuit held that the FCC erred by requiring any such regulations to be objective. "We have previously expressed considerable doubt about the view that 'malleable and open-ended,' aesthetic criteria per se prohibit service.

Two years of litigation does not seem to have put the issue of local regulations for wireless antennas to rest and it's hard to imagine the FCC will result in a clearer or more defensible standard for local aesthetic regulations. The agency will be tasked with developing a standard that allows local jurisdictions leeway to address aesthetic effects of 5G antennas on a situational basis, but not stray into an "objective" standard that constitutes impermissible preemption. 