Court Rejects RLECs' Appeal of CPUC Broadband Imputation Order

A state appeals court upheld a 2021 California Public Utilities Commission decision to adopt imputation of net positive retail broadband internet access service revenue of 10 small LECs and their ISP affiliates when calculating California High Cost Fund A (CHCF-A) support. The CPUC adopted the order April 15, 2021, and denied the LECs’ rehearing request Aug. 19 that year. The telcos sought court review of the two decisions in September 2021. In a Dec. 20 unpublished opinion, the 5th District California Court of Appeals rejected the 10 RLECs’ argument that broadband imputation isn't authorized by state law, exceeds the CPUC's authority, is preempted by federal law and is an unconstitutional taking. On the federal preemption issue, the CPUC is right that broadband imputation doesn't directly "impose economic or public utility type regulation on the ISP affiliates,” Justice Donald Franson wrote (case F083339). “It does not directly impose any requirement on their rates and practices, prohibit discrimination, impose tariffing requirements, impose accounting requirements, restrict entry or exist from the ISP business, impose interconnection obligation, or require unbundling or network access.” The CPUC "correctly found that broadband imputation does not impose price controls on ISP affiliates and does not impose any additional regulations affecting their operations." The court disagrees with telcos' argument that broadband imputation's indirect effects result in economic or utility-style regulation of ISPs, Franson added. On the constitutional claim, Franson wrote, “A subsidy is not private property and, therefore, the reduction of the subsidy does not constitute the taking of private property of the telephone companies or the ISP affiliates.” Justices Bert Levy and Kathleen Meehan concurred.