In NextG Networks of California, Inc. v. County of Los Angeles, (522 F.Supp.2d 1240, C.D.Cal., June 20, 2007), a federal district court considered whether a county ordinance which requires a telecommunications provider to comply with a conditional use permit (“CUP”) requirement in order to utilize county rights-of-way for its telecommunication services is preempted by federal law. The district court concluded that the county ordinance erects barriers to the telecommunications provider’s entry into the telecommunications market and is, therefore, preempted by the federal Telecommunications Act.
Facts
NextG Networks of California, Inc. (“NextG”), is a telecommunications company, which “provides the ‘transport’ of voice and data communications between points designated by consumers without altering the communications.” NextG’s customers are mostly retail wireless service providers, not end-users. NextG takes a communication signal from a customer and transports it over a fiber optic network. The handoffs take place through “nodes,” which are located on streetlight or utility poles situated in either public rights-of-way or in private utility easements. NextG owns, operates, and maintains the nodes, which include a power supply, fiber optic lines and an antenna. NextG also has a fiber optic network, which carries the signals to a “base station,” and then the signal is returned to NextG’s customer. NextG must have access to county rights-of-way to construct the nodes and lay the fiber optic cable.
NextG entered into contracts with customers which required it to start construction on nodes and fiber optics by September 30, 2007. In August 2005, NextG sought three encroachment permits from the County of Los Angeles (“County”) to construct nodes and fiber optics, but the County denied the request for permits. NextG was forced to seek a conditional use permit under Section 22.56 of the County Code to get approval to place its equipment on County property. More recently, NextG submitted applications on March 1, March 15, and April 3, 2007. However, NextG feared that, as in the past, the CUP process will delay construction of its projects. On April 19, 2007, NextG filed a motion for preliminary injunction, asking the trial court to enjoin County from enforcing section 22.56.
Decision
The United States District Court held that County’s ordinance was preempted by the federal Telecommunications Act and enjoined County from enforcing the CUP ordinance against NextG.
Title 47 U.S.C. § 253 of the Telecommunications Act of 1996 “broadly preempts local regulation of the telecommunications industry.” Section 253(a) provides that that no state or local statute, regulation, or legal requirement “may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.” Subsection (a) does not only preempt local regulations that totally prohibit a telecommunications company from providing services, “but also those that may have the effect of prohibiting the provision of such services.” Subsection (c), however, provides a safe harbor, to local regulations that manage the public rights-of way. It provides, in part, that nothing in section 253 changes a state’s or local authority’s right to manage their public rights-of-way or to require telecommunications providers to provide fair and reasonable compensation “on a competitively neutral basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.”
In analyzing whether the County’s CUP requirement is preempted by section 253, the court reviewed recent cases involving preemption of local regulations. One such case, City of Auburn v. Qwest Corp., 260 F.3d 1160 (9th Cir. 2001), involved a plaintiff’s attempt to invalidate city ordinances which imposed a franchise system to manage the telecommunications facilities installed in the city’s rights-of-way. The process included a lengthy and detailed application form and a public hearing requirement. It also gave the city discretion to grant, deny or revoke the franchises, remove the company’s facilities, impose civil and criminal penalties, and to regulate the transferability of ownership and reporting of stock sales. The Ninth Circuit Court of Appeals concluded that these requirements, taken together, have the effect of prohibiting the provision of telecommunication services and create a barrier to entry into and participation in the telecommunications markets of the city at issue.
In Qwest Communications, Inc. v. City of Berkeley, 433 F.3d 1253 (9th Cir. 2006), the Ninth Circuit Court of Appeals held that a local ordinance was invalid because it had the effect of prohibiting telecommunication companies from providing services within the city. The ordinance required telecommunication companies “to provide their qualifications and certifications of compliance with state and federal laws, and to publicly disclose all ‘agreements, tariffs, and other documents’ related to providing services.” The companies also had to provide annual reports, documents relating to tariffs, and contact information for anyone denied service. The city retained the power to audit financial information at any time if the city gave reasonable notice and the discretion to deny any permit and impose civil and criminal penalties. In Sprint Telephony PCS, L.P. v. County of San Diego, 490 F.3d 700 (9th Cir. 2007), the Ninth Circuit Court of Appeals found that section 253 preempted a zoning ordinance which imposed application submission and public hearing requirements, allowed the zoning authority to consider the visual impact of telecommunication facilities, imposed open-ended discretion for approval, and threatened criminal prosecution for violations of the ordinance.
The court found the following common features in the reviewed cases were a challenged ordinance was found to be preempted by section 253: (1) an application process that was complicated and required a telecommunication company to report financial information and pay high fees; (2) a required public hearing on an application, (3) the threat of criminal or civil sanctions, and (4) “unfettered discretion to approve or deny the application, or revoke a permit once issued.”
Under County Code section 22.56, an application for a CUP must include the following: applicant’s name and address; location and legal description of the property involved; the nature of the use that is being requested; information on uses and structures adjacent to the property and on the streets and highways providing access to the site; other permits and approval secured; a site plan; maps drawn to specification of the Director showing the property’s location and the location of streets, highways, and adjacent lots; a map indicating the uses of every parcel of land within a 500 foot radius of the subject property; a list of names and addresses of the owners of the subject property and owners of the property within 500 feet from the exterior boundaries of the property; “a map indicating where such ownerships are located;” and “any other information as the Director may require.” The applicant must also show, to the satisfaction of the hearing officer, that the requested use (1) will not have an adverse impact on the “health, peace, comfort or welfare” of persons who reside or work near the property; (2)“[b]e materially detrimental to the use, enjoyment or valuation” of the property around the subject property; or (3) otherwise jeopardize the public health, safety, or welfare. The fee to apply for the CUP is $5,369 and the County may deny an application that does not contain the information required by County ordinances.
The court found that application process imposed on NextG by section 22.56 had all of the common features of the ordinances that had been preempted– a lengthy and burdensome application process, a public hearing requirement, the threat of criminal and civil sanctions, and unfettered discretion. It stated, “Section 22.56 is so burdensome and complex that it erects a barrier to entry prohibited by section 253(a).” The court found that it did not matter that section 22.56 does not require a franchise or that it is an ordinance of general applicability. The court further found that the “safe harbor” provision found in section 253(c) does not apply because the provisions of County ordinance section 22.56 are not confined to the management of rights-of-way. Based on these conclusions, the court held that an injunction is appropriate and enjoined County from enforcing section 22.56 against NextG.
Note
Note: For a discussion of Qwest Communications, Inc. v. City of Berkeley and Sprint Telephony PCS, L.P. v. County of San Diego, please see our previous Legal Alerts entitled, “Federal Telecommunications Act Preempts Local Ordinances, But Communications Providers Must Show Actual Injury To Have Standing To Bring Action, And Local Taxes May Be Imposed,” January 31, 2006 and “Federal Court Of Appeals Holds A County’s Zoning Ordinance That Regulates Wireless Telecommunications Facilities Is Preempted By The Federal Telecommunications Act,” June 1, 2007.