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August 15, 2002, 9:00 AM ET, Alert No. 492.
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8th Circuit Rules States Cannot Bar Municipalities From Providing Telecom Services
8/14. The U.S. Court of Appeals (8thCir) issued its opinion [11 pages in PDF] in Missouri Municipal League v. FCC, vacating an FCC order denying a request that it preempt a Missouri statute that prohibits political subdivisions of the state from offering telecommunications services. It held that the term "any entity" in 47 U.S.C. § 253(a) includes political subdivisions of states. This ruling creates a conflict between the District of Columbia Circuit and the 8th Circuit.
Missouri Statutes, Section 392.410(7), provides that, subject to certain enumerated exceptions, "No political subdivision of this state shall provide or offer for sale, either to the public or to a telecommunications provider, a telecommunications service or telecommunications facility used to provide a telecommunications service for which a certificate of service authority is required pursuant to this section."
Various municipalities and municipal organizations filed a petition with the Federal Communications Commission (FCC) asking that it preempt this statute for being in violation of 47 U.S.C. § 253(a).
47 U.S.C. § 253(a) provides that "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." (Emphasis added.)
The FCC denied the request to preempt by Memorandum Opinion and Order [18 pages in PDF] released on January 12, 2001. (This is CC Docket No. 98-122.) The FCC wrote that "We do not preempt the enforcement of HB 620 to the extent that it limits the ability of municipalities or municipally owned utilities, acting as political subdivisions of the state of Missouri, from providing telecommunications services or facilities. As we found in the Texas Preemption Order, the term ``any entity´´ in section 253(a) of the Act was not intended to include political subdivisions of the state, but rather appears to prohibit restrictions on market entry that apply to independent entities subject to state regulation."
The FCC added that "municipal entry into telecommunications could raise issues regarding taxpayer protection from economic risks of entry, as well as questions concerning possible regulatory bias when a municipality acts as both a regulator and a competitor."
Former Commissioners William Kennard, Gloria Tristani and Susan Ness wrote that they concurred, with reluctance, because they felt constrained by the Texas precedent.
The municipal parties then filed a petition for review with the U.S. Court of Appeals (8thCir). Southwestern Bell and the State of Missouri intervened in support of the FCC order. The National Association of Telecommunications Officers and Advisors (NATOA) and the United Telecom Council supported the municipal parties, as amici curiae.
The Appeals Court vacated the FCC order, and remanded. It reasoned that "The dispute hinges on the meaning of the phrase ``any entity´´ in § 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."
(The Supreme Court held in Gregory v. Ashcroft, that a court must not construe a federal statute to preempt traditional state powers unless Congress has made its intention to do so unmistakably clear in the language of the statute.)
The Appeals Court concluded "that because municipalities fall within the ordinary definition of the term ``entity,´´ and because Congress gave that term expansive scope by using the modifier "any," individual municipalities are encompassed within the term ``any entity´´ as used in § 253(a)."
Conflict with the DC Circuit. This is not the first time municipalities have sought to have a state statute preempted under Section 253. The FCC considered, and rejected, such a challenge arising in the state of Texas. The FCC, by a Memorandum Opinion and Order, also known as the Texas Preemption Order, declined to preempt a Texas statute that is very similar to the Missouri statute. The City of Abilene and others filed a petition for review with the U.S. Court of Appeals (DCCir). The DC Circuit issued its opinion in 1999 upholding the FCC order. (See, City of Abilene v. FCC, 164 F.3d 49.)
The Eighth Circuit, in the present case, addressed the DC Circuit opinion. It wrote bluntly, "we do not find City of Abilene to be persuasive."
Judge Robert Wollman wrote the opinion for the 8th Circuit. Judge Raymond Randolph wrote the opinion for the DC Circuit.
FTC Requires MSC Software to License Nastran Software Royalty Free
8/14. The Federal Trade Commission (FTC) issued an administrative complaint against MSC Software Corporation alleging violations of Section 5 of the Federal Trade Commission Act (FTCA) and Section 7 of the Clayton Act in connection with its 1999 acquisitions of Universal Analytics, Inc. (UAI) and Computerized Structural Analysis & Research Corp. (CSAR). The FTC also entered into an Agreement Containing Consent Order [22 pages PDF].
This proceeding is titled "In the Matter of MSC.Software". It is FTC Docket No. 9299. The FTC did not publish a copy of the complaint in its web site. Rather, it described the allegations in a press release. See also, MSC Software release.
MSC sells simulation software, and related services and systems. The FTC stated that MSC was the dominant supplier of Nastran software, which is an engineering simulation software program used in the aerospace and automotive industries, with an estimated 90% of worldwide revenue; UAI and CSAR each had sales of about 5% of worldwide revenue. MSC then acquired UAI and CSAR.
Under the terms of the proposed agreement, MSC must divest at least one copy of its current advanced Nastran software, including the source code. The divestiture will be through royalty free, perpetual, non-exclusive licenses to one or two acquirers who must be approved by the FTC.
FTC Commissioner Mozelle Thompson wrote a concurring statement. He wrote that "I voted to accept the agreement; however, I am concerned that industry and the private bar do not mistakenly make too much of the fact that the Commission did not require an up-front buyer for this licensing divestiture. As a general rule, the Commission is more likely to require that parties present up-front buyers for assets when divesting less than an ongoing business. In this unique case, however, the Commission decided to resolve its concerns about MSC.Software's two consummated acquisitions by accepting an order requiring a prompt divestiture to restore lost competition, instead of potentially delaying relief further by first forcing MSC.Software to negotiate an asset sale to a potential buyer."
Computer Chips v. Corn Chips
8/14. President Bush gave a speech at a McCallum for Governor luncheon in Milwaukee, Wisconsin. He stated that "For the first time in a long time I now have what's called trade promotion authority. And I understand good trade policy will yield good jobs. If you're confident about something, you try to promote it. I'm confident about the American people's ability to out produce anybody in the world. ... I'm confident that our high tech entrepreneurs are the best in the world. I'm confident that we can compete with a level playing field. I intend to use trade promotion authority to sell U.S. products abroad, which will be good for high paying jobs here in America."
Bush elaborated on this subject in a speech in Des Moines, Iowa. He said that "Farmers are, I'm sure, skeptical when they hear about trade. After all, the agriculture sector had been kind of a part of trade negotiations. Then when times got tough, they just kind of tossed the farmers aside, said they'd rather focus on computer chips than corn chips. But those days have changed. Those days have changed. See, I understand you start with strength when it comes to playing the American hand. I understand that if you're interested in economic security for every American, you do what you're good at. And what we're good at is growing food and hogs and cattle. And it's my job and the job of this administration, now that I've got trade promotion authority to do everything we can to knock down the barriers so you can be selling your products all over the world."
After a lengthy discussion of export of farm products and farm equipment, he concluded, "You see, trade is not only good for the farmers and ranchers, the entrepreneurs and the high tech people. Trade is good for the working people here in America, and I intend to make America a free trading nation."
He did not mention U.S. steel tariffs.
People and Appointments
8/14. Guy Lewis was named Director of the Executive Office for United States Attorneys (EOUSA) of the Department of Justice (DOJ). He was previously the U.S. Attorney for the Southern District of Florida. See, DOJ release.
8/14. Keith Lourdeau was named Chief of the Federal Bureau of Investigation's (FBI) Cyber Crime Section, Cyber Division. Lourdeau has been with the FBI since 1986, most recently as Assistant Special Agent in Charge of the St. Louis Division. See, FBI release.
8/14. Thomas Richardson was named Assistant Director of the Federal Bureau of Investigation's (FBI) Investigative Technologies Division. Richardson has been with the FBI since 1975. See, FBI release.
6th Circuit Affirms District Court Cellular Tower Variance Order
8/14. The U.S. Court of Appeals (6thCir) issued its opinion in New Par v. City of Saginaw, affirming a District Court order compelling a local zoning board to grant New Par a variance to allow it to construct a cell tower, pursuant to 47 U.S.C. § 332.
Background. New Par, which does business as Verizon Wireless, provides cellular telephone service in the Detroit, Michigan area, including in the City of Saginaw. New Par sought to fill in a gap in its coverage area by constructing a new cellular tower in Saginaw. In March 2000, New Par submitted an application for a building permit for 150 foot tall cellular telephone monopole on a parcel of property owned by New Par. The property was zoned light industrial, but was smaller than the minimum size for light industrial use. Hence, New Par sought a variance from the Saginaw Zoning Board of Appeals from the minimum size requirements. Saginaw denied the request. It issued a written order which did not explain its reasons, other than that it was based "on the facts presented and the Board's determination".
Statute. 47 U.S.C. § 332 provides, at § 332(c)(7)(A) that "Except as provided in this paragraph, nothing in this chapter shall limit or affect the authority of a State or local government or instrumentality thereof over decisions regarding the placement, construction, and modification of personal wireless service facilities." § 332(c)(7)(B) then provides limitations to this general rule. § 332(c)(7)(B)(ii) prevents state and local governments from unreasonably discriminating among providers, and from prohibiting the provision of service. However, this case involves the "in writing" and "substantial evidence" requirements of § 332(c)(7)(B)(iii), which provides that "Any decision by a State or local government or instrumentality thereof to deny a request to place, construct, or modify personal wireless service facilities shall be in writing and supported by substantial evidence contained in a written record."
District Court. New Par filed a complaint in the U.S. District Court (EDMich) alleging that the Board's denial of its request for a variance violated Section 332, violated New Par's substantive due process rights, and constituted a regulatory taking. The District Court granted summary judgment to New Par on the grounds that it failed to meet the "substantial evidence" requirement of Section 332. It held that Saginaw met the "in writing" requirement. The Court did not address the two other causes of actions. The Court also issued an injunction ordering Saginaw to grant the variance. Saginaw appealed.
Appeals Court. The Appeals Court affirmed the District Court's grant of summary judgment and injunction order. However, it went further in its reasoning. It held that Saginaw violated both the "in writing" requirement, and the "substantial evidence" requirement.
The Appeals Court adopted a definition of "in writing". It wrote that "We hold that for a decision by a State or local government or instrumentality thereof denying a request to place, construct, or modify personal wireless service facilities to be ``in writing´´ for the purposes of 47 U.S.C. § 332(c)(7)(B)(iii), it must (1) be separate from the written record; (2) describe the reasons for the denial; and (3) contain a sufficient explanation of the reasons for the denial to allow a reviewing court to evaluate the evidence in the record that supports those reasons." The Appeals Court added that "Board's order denying New Par's variance request was separate from the written record, but it did not contain any explanation of the reasons for the denial."
The Court also held that Saginaw failed to meet the "substantial evidence" requirement, and that an injunction order (as opposed to a remand order) was appropriate.
More News
8/14. Qwest announced that "it believes that the U. S. Attorney's Office is investigating various matters that also are subject to the investigation by the Denver Regional Office of the Securities and Exchange Commission (SEC). Qwest has previously disclosed investigations under way by the SEC, Congress and the U. S. Attorney's office in Denver. The U. S. Attorney's office has requested that Qwest make presentations similar to those made by the company to the SEC on these matters." See, Qwest release.
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