2011-892, Appeal of Bretton Woods Telephone Company, Inc. & a.

registrations of competitive local exchange carriers (CLECs) authorized by the Commission (PUC) denying their motion to rescind or declare null and void

carriers (RLECs), appeal an order of the New Hampshire Public Utilities

No. 2011-892 Public Utilities Commission Granite State Telephone, Inc., four exempt incumbent rural local exchange Dixville Telephone Company, Dunbarton Telephone Company, Inc., and LYNN, J. The petitioners, Bretton Woods Telephone Company, Inc.,

Murtha Cullina LLP

Carolyn Cole

New England Cable and Telecommunications Association, Inc. Robert J. Munnelly, Jr. on the brief, and Mr. Munnelly orally), for intervenor ___________________________, of Boston, Massachusetts (Olga L. Gordon and

reporter@courts.state.nh.us the brief, and Mr. Malone orally), for the petitioners. to press. Errors may be reported by E-mail at the following address: Devine, Millimet & Branch, P.A., of Manchester (Harry N. Malone & a. on

(New Hampshire Public Utilities Commission)

editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as telecommunications services in a single area.” Appeal of Union Tel. Co. p. 2 is consistent with the public good to allow more than one provider to provide

require the PUC to conduct a searching inquiry before determining whether it We reasoned that “the legislative intent underlying RSA 374:22-g . . . is to

to the enforcement of this section.

III. The commission shall adopt rules, pursuant to RSA 541-A, relative

any, derived by the incumbent as a result of incurring such expenses. providers, taking into account the proportionate benefit or savings, if expenses incurred by the incumbent utility to benefit competitive

return on its investment; and the recovery from competitive providers of

obligations; the incumbent utility’s opportunity to realize a reasonable fairness; economic efficiency; universal service; carrier of last resort interests of competition with other factors including, but not limited to,

II. In determining the public good, the commission shall consider the

prohibited by federal law. and determines that it p. 2 is consistent with the public good unless

than one provider, in any service territory, when the commission finds

determine in the first instance whether federal law preempts this state requirement of notice and a hearing, and remanded this issue to “the PUC to exchange services, and any other telecommunications services, by more

Telecommunications Act of 1996, 47 U.S.C. § 253(a) (2006), may preempt the N.H. at 319. We noted, however, that § 253(a) of the federal to authorize the providing of telecommunications services, including local commission, upon petition or on its own motion, shall have the authority, 160 to the jurisdiction of the commission, shall be nonexclusive. The

authority to a CLEC to enter the service territory of the RLEC. Appeal of Union

served by a telephone utility that provides local exchange service, subject

this requirement of prior notice and a hearing. Id

prior notice and a hearing under RSA 374:26 (2009) before the PUC grants

This appeal follows our decision in Appeal of Union Telephone Co.

other provision of law to the contrary, all telephone franchise areas I. To the extent consistent with federal law and notwithstanding any

the argument that RSA 374:22-g (2009), enacted after RSA 374:26, supplanted Tel. Co., 160 N.H. at 319. As a matter of statutory interpretation, we rejected

N.H. 309 (2010). In that case, we held that an incumbent RLEC is entitled to

RLECs. We affirm. PUC to engage in business as telephone utilities in the service territories of will be published relative to the CLEC request and the nature of

p. 3 b. Public notice, commonly in the form of a Commission Order of Notice,

petition, application or other form of request. the CLEC will request entry into a telephone utility service territory via

the service territory of a non-exempt [incumbent local exchange carrier],

a. Except as provided in Puc Rules Part 431, regarding registration in

The stipulation provides:

Telecommunications Act].

telecommunications services in violation of Section 253(a) [of the burdensome so as to “prohibit or have the effect of prohibiting” determine whether these CLEC entry proceedings would be so unduly

374:22-g not preempted . . . [and] provide[s] a baseline for the [PUC] to

entry into RLEC territories should the [PUC] find RSA 374:26 and RSA describ[es] the procedures to be followed in proceedings related to CLEC

service territory.” According to the petitioners, the stipulation

Hampshire law to require for “CLEC registration requests in a telephone utility stipulated to a multi-step adjudicative process that they understood New from the parties. Assuming no preemption, the parties and PUC staff

decision in Appeal of Union Tel. Co.

record, the PUC accepted briefing, testimony, and data requests and responses

federal law actually conflict.” Appeal of Union Tel. Co., 160 N.H. at 321 (quotation omitted). granting exclusive regulatory power in a particular field to the federal government; or (3) state and Congress expresses an intent to displace state law; (2) Congress implicitly supplants state law by 1 “Under the Supremacy Clause of the Federal Constitution, state law is preempted where: (1) such competition would be consistent with the public good. In light of our

representing private telecommunications providers. As part of the factual

had failed to provide notice, hold hearings, and determine whether allowing statutes, the petitioners alleged that the PUC, before issuing the registrations, territories of RLECs. Citing RSA 374:26 and RSA 374:22-g, among other Telecommunications Association (NECTA), a regional trade association the PUC to operate in service territories of RLECs, and New England Cable and granted petitions to intervene of segTEL, Inc. (segTEL), a CLEC authorized by To develop a factual record upon which to base its decision, the PUC

CLECs authorized by the PUC to operate as telephone utilities in the service

federal law does not preempt these requirements.

requested that the PUC rescind or declare null and void the registrations of The petitioners here then instituted the underlying proceeding and

remand, the parties settled before the PUC could resolve this issue. statutory requirement.”1 Appeal of Union Tel. Co., 160 N.H. at 323. On p. 4 4

factors requiring consideration of the incumbent provider’s opportunity to earn

provider would be consistent with the public good. Addressing specifically the

allowing a telecommunications provider to enter the service territory of another each of the factors enumerated in RSA 37 p. 4 4:22-g, II for determining whether made by Congress . . . no hearing is ‘due’.” The PUC also found preempted

territory,” and that “[b]ecause the public good determination has already been

that it is for the public good to allow more than one carrier to operate in any RSA 37 p. 4 4:26, the PUC found that in enacting § 253(a), “Congress determined U.S.C. § 253(a) (2006). With respect to the notice and hearing requirement of

entity to provide any interstate or intrastate telecommunications service.” p. 4 47

requirements that “prohibit or have the effect of prohibiting the ability of any g, II. Section 253(a) preempts state and local laws, regulations, and § 253(a) of the Telecommunications Act preempts RSA 37 p. 4 4:26 and RSA 374:22- The PUC ultimately denied the petitioners’ request and ruled that

applicable appeal statutes. Commission ruling pursuant to RSA 5 p. 4 41:1, RSA 541:6 or other j. Parties can petition for reconsideration or appeal of an adverse

i. The Commission will issue an Order pursuant to RSA 363:17-b.

law.

h. The parties can file briefs and/or requests for findings of fact or

record. to review and address evidence submitted for possible inclusion in the

g. The parties will have the opportunity for a public evidentiary hearing

hearing. testimony and other evidence offered prior to a public evidentiary f. The parties will have the opportunity to propound discovery on

listed in RSA 37 p. 4 4:22-g and other facts material to the CLEC request. testimony (initial and, in certain cases, rebuttal) on any relevant factor e. The RLEC and other parties will be afforded an opportunity to file

procedural steps. will be held to decide interventions and determine a schedule for d. An initial Commission pre-hearing conference and technical session

parties can petition to intervene in the proceeding. c. The affected RLEC will be a mandatory party and other interested

RLECs serving the service territories for which entry is requested. applicable Commission review. This Notice will be served on the affected p. 5 5

determination that § 2 p. 5 53 of the Telecommunications Act preempts RSA 374:22- On appeal, the petitioners limit their argument to challenging the PUC’s

petitioners’ motion for rehearing, this appeal followed.

consumers in the context of competitive entry.” After the PUC denied the

continued quality of telecommunications services, and safeguard the rights of advance universal service, protect the public safety and welfare, ensure the whether additional or modified requirements are necessary to preserve and

“commence a rulemaking to address, in a competitively neutral manner, Having found these statutes preempted, the PUC concluded that it would

consumers.” 47 U.S.C. § 2 p. 5 53(b).

quality of telecommunications services, and safeguard the rights of

universal service, protect the public safety and welfare, ensure the continued

Act’s universal service provisions and unnecessary “to preserve and advance concluded that both statutes were inconsistent with the Telecommunications injury to the incumbent telecommunications provider. Additionally, the PUC

participants and potential participants in the market,” but instead focus on

are not “competitively neutral with respect to, and as between, all of the § 2 p. 5 53(b) did not save RSA 374:22-g, II because the factors enumerated therein adjudicative process on a case-by-case basis. The PUC also found that

are necessarily of general applicability and cannot be imposed properly in an

§ 2 p. 5 53(b) did not save RSA 374:26 because competitively neutral requirements the rights of consumers.” 47 U.S.C. § 253(b) (2006). The PUC found that ensure the continued quality of telecommunications services, and safeguard

preserve and advance universal service, protect the public safety and welfare,

the Telecommunications Act’s universal service provisions and “necessary to

impose requirements on a competitively neutral basis that are consistent with

saved by § 2 p. 5 53(b) of the Telecommunications Act, which allows states to The PUC next determined that RSA 374:26 and RSA 374:22-g, II are not

states to prohibit competitive entry because of these factors. obligations, the PUC reasoned the Telecommunications Act does not allow the with regard to the factors of universal service and carrier of last resort

that determination in the context of [a] competitor’s petition for entry.” Finally,

in an economically efficient manner, and it is not for the Commission to make marketplace will be the ultimate determinant whether a competitor is operating positioned to address the factor of economic efficiency because “[t]he

been granted authority to enter.” The PUC also found that it was not well-

fairness, or “how to assess ‘fairness’ to subsequent competitors after one has expressed concern that the state statute does not make clear how to evaluate to deny entry to competitors.” With regard to the factor of fairness, the PUC

competition, the PUC concluded that the “threat of financial harm cannot serve a reasonable return and ability to recover net expenses incurred because of p. 6 6 of reviewing courts. Appeal of Union Tel. Co. determinations to the informed judgment of the PUC and not to the preference

therefore, have not demonstrated that the PUC erred in finding § 253(f) inapplicable to this case. choices of policy are at issue and the legislature has entrusted such policy 47 U.S.C. § 253(f)(1) (200 p. 6 6). On appeal, the petitioners have not challenged this reasoning, and, exchange services and § 253(f) applies only to non-exempt providers of local exchange services. explained that § 253(f) does not apply to the petitioners because they are exempt providers of local offer.” State v. Buchanan neutral basis. 47 U.S.C. § 253(f) (2006). In denying the petitioners’ motion for rehearing, the PUC Telecommunications Act permits the imposition of certain entry requirements on a competitively 3 The petitioners also assert that the PUC failed to recognize that § 253(f) of the the evidence, that the order is unjust or unreasonable. RSA 541:13 (2007); see demonstrating that the order is contrary to law or, by a clear preponderance of Kilnwood on Kanasatka Condo. Unit Assoc. v. Smith, 163 N.H. 751, 753 (2012). preempted. “We consider this argument to be insufficiently developed for appellate review.” A party seeking to set aside an order of the PUC has the burden of 374:26 in passing only, we express no opinion on whether the PUC correctly found RSA 374:26 2 Because petitioners limit their preemption arguments to RSA 374:22-g, II, and refer to RSA playing field.”

principles: of judicial deference carry particular significance where, as here, discretionary (interpreting federal firearms law). We also keep in mind two general

with federal policy taking into account whatever guidance, if any, state law may Act, “we first examine its language and structure and interpret it in accordance To determine the preemptive reach of § 253 of the Telecommunications

statutory interpretation de novo. Id. give the PUC’s policy choices considerable deference, we review the PUC's

“establishing a regulatory scheme that is not competitively neutral among the “for failing to impose requirements on a competitively neutral basis” and by 1 p. 6 60 N.H. at 313. The statutory presumption and the corresponding obligation conditions on market entry in the interest of the public good.” prima facie lawful and reasonable. RSA 541:13; see Appeal of Union Tel. Co., Appeal of Union Tel. Co. Telecommunications Act permits the imposition of “competitively neutral, 160 N.H. at 313. Findings of fact by the PUC are petitioners allege the PUC failed to recognize that § 253(b) of the

petitioners contend that the PUC’s order itself is unlawful and unreasonable

found all of the factors specified in RSA 3 p. 7 74:22-g, II preempted. Third, the N.H. at 321 (quotation omitted). Second, they contend that the PUC improperly balanced legal and regulatory environment.” Appeal of Union Tel. Co., 1 p. 6 60 the ability of any competitor or potential competitor to compete in a fair and the proscription of § 253(a) because it does not “materially inhibit[] or limit[] g, II.2 First, the petitioners contend that RSA 374:22-g, II does not fall within 7

granting and maintaining local exchange monopolies.” AT&T Corp. v. Iowa Congress enacted § 253(a) to “end[] the States’ longstanding practice of

Pelkey v. Dan’s City Used Cars must be competitively neutral, consistent with the Telecommunication Act’s

safeguard the rights of consumers.” 4 p. 7 7 USC § 253(b).

regulation of telecommunications providers. Permissible state regulations touchstone in every pre-emption case.

and welfare, ensure the continued quality of telecommunications services, and necessary to preserve and advance universal service, protect the public safety allows “a State to impose, on a competitively neutral basis . . . requirements

Section 253 (b), by contrast, is a safe-harbor provision for limited state oft-repeated comment that the purpose of Congress is the ultimate

§ 253(a). Id

environment.” Appeal of Union Tel. Co. telecommunications service.” 4 p. 7 7 U.S.C. § 253(a). Section 253(b) expressly competitor to compete in a fair and balanced legal and regulatory “materially inhibits or limits the ability of any competitor or potential

Second, analysis of the scope of the statute’s preemption is guided by the . A prohibition does not need to be complete or insurmountable to run afoul of Federal Act unless that was the clear and manifest purpose of Congress.

prohibiting the ability of any entity to provide any interstate or intrastate other State or local legal requirement, may prohibit or have the effect of Communications Commission (FCC), § 253(a) preempts any state law that balance. Section 253(a) provides: “No State or local statute or regulation, or Utilities Bd., 525 U.S. 366, 405 (1999). According to courts and the Federal

historic police powers of the States were not to be superseded by the

F.3d 9, 15 (1st Cir. 2006). Subsections (a) and (b) of § 253 illustrate this telecommunications providers. Puerto Rico v. Municipality of Guayanilla, 450 local telecommunications markets; and (2) limited state and local regulation of interests: (1) competitive access for telecommunications providers to state and Section 253 of the Telecommunications Act balances two competing

(2005). we review de States have traditionally occupied, we start with the assumption that the novo.” Carlisle v. Frisbie Memorial Hospital, 152 N.H. p. 7 762, 770 U.S. 470, 485 (1996). Ultimately, federal “preemption is a matter of law, which particularly in those in which Congress has legislated in a field which the citations, ellipses, and brackets omitted); see empt state-law causes of action. In all preemption cases, and also Medtronic, Inc. v. Lohr, 518

system, we have long presumed that Congress does not cavalierly pre- First, because the States are independent sovereigns in our federal environment.” Appeal of Union Tel. Co.

complete or insurmountable to run afoul of section 253(a).” Id potential competitor to compete in a fair and balanced legal and regulatory insurmountable prohibition to competition, “a prohibition does not need to be RSA 374:22-g, II “materially inhibits or limits the ability of any competitor or take months and possibly a year or more to complete,” we are persuaded that

telecommunications provider and is “not competitively neutral with respect to, require” it to allow a CLEC to enter into the service territory of an RLEC); see

convenience”). Although RSA 374:22-g, II may not form a complete or

Based on the PUC’s factual finding that such an adjudicative process “would

PUC that RSA 374:22-g, II impermissibly focuses on injury to the incumbent hold a hearing to determine whether “public convenience and necessity

Wisconsin state statute to mean “is consistent with public necessity and

process before a CLEC may enter the service territory of an incumbent RLEC. including RSA 374:22-g, II, to require completion of a multi-step adjudicative competitively neutral and, therefore, not saved by § 253(b). We agree with the the parties and PUC staff correctly interprets New Hampshire law, necessarily preempts state statute directing the Wisconsin Public Utilities Commission to We also accept the PUC’s finding that RSA 374:22-g, II is not

omitted); see Municipality of Guayanilla, 450 F.3d at 1 p. 8 8.

continue to regulate, subject to certain conditions.” In the Matter of the Public

(interpreting the language “public convenience and necessity require” from also Lodi Tel. Co. v. Pub. Serv. Com’n., 55 N.W.2d 379, 3 p. 8 83 (Wisc. 1952)

this conclusion because we assume, without deciding, that the stipulation of 27 p. 8 87762, at *8 (Wisc. Pub. Serv. Comm. May 9, 2008) (finding that § 253(a) see Re Sprint Communications Company L.P., No. 6055–NC–103, 2008 WL

subsection (b), carve out defined areas in which states may regulate or

§ 253(a) of the Telecommunications Act preempts RSA 374:22-g, II. We reach Turning to the merits of the appeal, we affirm the PUC’s finding that

Utility Commission of Texas & a., 13 F.C.C.R. 3460, 34 p. 8 81 (1997). U.S.C. § 253(b); see telecommunications services, and safeguard the rights of consumers.” 47 ability of states to regulate. All of the remaining subsections, including 2001). “Subsection (a) is the only portion of section 253 that broadly limits the Telecommunications v. Town of Palm Beach, 252 F.3d 1169, 1187 (11th Cir. states to regulate telecommunications providers. See id.; see also BellSouth Id. It does not impose an independent, substantive limitation on the ability of other words, § 253(b) is an affirmative defense to preemption under § 253(a). Wireless v. Neb. Pub. Serv. Com’n, 778 N.W.2d 452, 463-64 (Neb. 2010). In violates § 253(a) before engaging in analysis under § 253(b). See TracFone F.C.C.R. 15639, 15657 (1997). Additionally, a court must find that a state law

service, protect the public safety and welfare, ensure the continued quality of universal service provisions, and “necessary to preserve and advance universal p. 9 9

argument is not ripe for our review.

PUC has not yet adopted such administrative rules, we conclude that this

the rights of consumers in the context of competitive entry.” Thus, because the ensure the continued quality of telecommunications services, and safeguard preserve and advance universal service, protect the public safety and welfare,

deference to the PUC’s finding that they may not. Cf neutral manner, whether additional or modified requirements are necessary to imposed through such an adjudicatory process, we accord substantial specifically address whether competitively neutral requirements may be

process on a case-by-case basis.” See

explained that it would “commence a rulemaking to address, in a competitively uneven playing field,” we conclude that this argument is premature. The PUC 374:22-g, II is not competitively neutral. Given that § 253(b) does not that is not competitively neutral, . . . consign[ing] RLECs to competing on an

imposed by administrative rule and could not be imposed in an adjudicated

for purposes of this appeal, we affirm the PUC’s determination that RSA g, II preempted, the “Commission’s order itself establishes a regulatory scheme would require an extensive case-by-case adjudicative process, which we accept stipulation of the parties and PUC staff that satisfaction of RSA 374:22-g, II As for the petitioners’ final contention, that by having found RSA 374:22-

incumbent RLECs] on a competitively neutral basis . . . they would properly be Commission to impose requirements [on CLEC entry into service territories of competition, we find significant the PUC’s determination that “[i]n order for the

CLEC to enter into the service territory of an RLEC). Accordingly, in light of the industries it regulates”).

on their face, protect incumbent telecommunications providers from Additionally, although the other factors listed in RSA 374:22-g, II do not,

determine whether “public convenience and necessity require” it to allow a N.H. 1062, 1075 (1 p. 9 982) (the PUC has “expertise and knowledge of the Nat’l Ins. Co., 156 N.H. 429, 434 (2007); Appeal of Public Serv. Co. of N.H., 122 competition. See. Grand China v. United its investment” and ability to recover net expenses incurred because of

entrants (or vice-versa).”). directing the Wisconsin Public Utilities Commission to hold a hearing to L.P., 2008 WL 2787762, at *8 (finding that § 253(b) did not save state statute

consideration of the incumbent’s “opportunity to realize a reasonable return on

general matter be ‘competitively neutral’ if it favors incumbent LECs over new 14 F.C.C.R. 11064, 11071 (1 p. 9 999) (“[A] state legal requirement would not as a

In the Matter of AVR, L.P. d/b/a Hyperion of Tennessee, L.P.,

incumbent RLEC by permitting the PUC to prohibit competition based upon local exchange carriers from competition). RSA 374:22-g, II clearly favors an (10th Cir. 2000) (finding state law preempted because it protected incumbent market.” See RT Communications, Inc. v. F.C.C., 201 F.3d 1264, 1267-6 p. 9 9 and as between, all of the participants and potential participants in the p. 10 Affirmed

state law.

alternative, less burdensome process, that comports with both federal and

compete in a fair and balanced legal and regulatory environment.” Appeal of

on whether, through rulemaking or otherwise, the PUC may develop an

determination that competition in a single service territory always DALIANIS, C.J., and HICKS and CONBOY, JJ., concurred.

possibility of prohibition.” Level 3 374:22-g, II too burdensome and, therefore, preempted. We express no opinion deciding not this case, we have found the stipulated process for compliance with RSA public good. The PUC must still make this determination. RSA 374:22-g, I. In

particularly when considered together with § 253(b), does not evince Congress’s Union Tel. Co., 160 N.H. at 321 (quotation omitted). Section 253(a), prohibiting,” the PUC erroneously expanded the statute’s preemptive reach. Cf inserting the word “could” before the statutory phrase “have the effect of telecommunications service.” (Emphasis added; quotation omitted.) By Telecommunications Act is whether a state law or regulation “materially The correct standard for preemption under § 253(a) of the § 253(a) preempts “a statutorily required process that could

plaintiff “must show actual or effective prohibition, rather than the mere carrier to operate in any territory,” and that the PUC is preempted “from Telephony PCS, L.P., 543 F.3d at 578. Under a plain reading of § 253(a), a 2007). The word “may” in § 253(a) does not mean “might possibly.” Sprint 2008) (en banc); Level 3 v. City of St. Louis, Mo., 477 F.3d 528, 532 (8th Cir. Sprint Telephony PCS, L.P. v. County of San Diego, 543 F.3d 571, 578 (9th Cir.

prohibiting the ability of any entity to provide any interstate or intrastate

another telephone utility . . . .” Similarly, the PUC erred in reasoning that

to allow a telephone utility to compete in the service area of

“Congress determined that it is for the public good to allow more than one note that the PUC erred when it concluded that, in enacting § 253(a), rules to govern CLEC entry into the service territories of incumbent RLECs, we Finally, because the PUC has indicated that it may adopt administrative