Ky. 911 Board Says State Fees Don't Thwart Universal Service

Protecting wireless industry profits isn’t a good reason to preempt a Kentucky 911 fee law, the state argued Friday. CTIA and the Kentucky 911 Service Board opposed each other’s July summary judgment motions (see 2307280073) in responses at the U.S. District Court for Eastern Kentucky.

A trial on CTIA’s legal fight with the Kentucky board (case 3:20-cv-00043) is set for Jan. 30. The case is back in district court after the 6th Circuit U.S. Court of Appeals declined last year to rehear judges’ ruling that the lower court erred in concluding the 2018 federal Wireless Telecom Tax and Fee Collection Fairness Act conflicts with and preempts a 2020 Kentucky 911 law known as HB 208 (see 2201280059). The state law made Lifeline providers directly liable for 911 fees and barred them from passing the charge to users.

"Congress’s universal service objectives do not extend to allowing providers to profit or even to necessarily recover their costs,” the Kentucky board wrote: "HB 208 is no more an obstacle to Congress’s objectives than countless other state laws that increase business costs,” like taxes and employment rules. The association’s “suggestion that HB 208 could drive providers out of the Lifeline market in Kentucky is speculative and does not demonstrate an obstacle to congressional objectives,” the board added.

Focusing on the law's effect on profitability "ignores the underlying issue,” responded CTIA: “By imposing a unique funding burden on carriers that choose to offer Free Lifeline Only Service, HB 208 disincentivizes providers from offering that service in Kentucky, which is detrimental to end users and is contrary to the federal goal of universal service.” Such free services “are critical for advancing the universal service goal and are federally safeguarded,” CTIA said. While no provider currently provides them in the state, the example illustrates “that a provider that chose such a business model could not comply with both federal law and HB 208.”

The Kentucky board criticized CTIA for relying "on a hypothetical provider” that exclusively provides free Lifeline services. "The idea of a free-only Lifeline business model is fantasy,” it said. “None of CTIA’s members operate under that business model.” Free Lifeline service was never Congress' or the FCC’s goal, added the board: Rather, they sought affordable service. It's too late for CTIA to now claim compliance with both the state and federal laws is impossible, the Kentucky board said. The argument also "fails as a matter of law" because it depends on an unproven "claim that Lifeline providers will have no revenue or source of funds other than the federal Lifeline subsidy from which to pay the HB 208 service charges and will thus be forced to pay the Lifeline charges from the federal Lifeline subsidy.”

"Defendants claim that invalidating HB 208 will cause Lifeline providers to ‘not pay their fair share’ of 911 fees,” the wireless industry association said. “What is actually going on is that Kentucky has attempted to create a system to ensure recovery of its own 911 costs by diverting limited Lifeline funds away from their intended purpose in conflict with, and imposing an obstacle to, the federal goal of universal service.” The state law “is preempted by federal law -- Sections 151, 254 and 1510 of the Communications Act, as well as FCC decisions implementing it -- and specifically targets Lifeline carriers for different treatment in violation of the [Constitution’s] Equal Protection Clause, the Takings Clause, and due process."

Imposing a revenue-generating fee isn't exercising state police power, said CTIA, saying the 911 fee isn’t a tax: "A state cannot be prevented from imposing and collecting a charge to support 911 emergency services, but such a charge must conform with federal laws and objectives." The Kentucky law conflicts with the Communications Act and the Fairness Act “because it erects an obstacle … to the federal goal of universal service by directly increasing the cost of providing Lifeline service to each and every Lifeline end user in Kentucky," it said.

CTIA erroneously "attempts to knit together separate" federal laws, including by trying to merge 2018's Fairness and Mobile Now acts, and by trying to tie the Fairness Act to the Communications and Telecom acts, said the Kentucky board: Nothing in the Fairness Act text "supports universal service.”

"CTIA’s equal-protection claim fails because Lifeline providers are not similarly situated to other wireless providers; thus, they are not treated disparately,” said the state board. Unlike regular providers, Lifeline providers offer a subsidized service and impose a burden on the 911 systems "because providers cannot be required to recover from Lifeline users without a financial transaction,” it said. CTIA disagreed, saying there's no difference between Lifeline and other wireless providers.

CTIA’s takings "claim fails because a prospective regulatory fee does not implicate the Takings Clause,” the state said. And the association’s due-process claims fail because the 2020 law has a rational basis and court precedent doesn't require "a direct benefit between a payor and a beneficiary of a fee.” CTIA countered that, by prohibiting providers from using Lifeline subsidies to pay 911 fees, the Kentucky board is unconstitutionally requiring providers to use their own money for a public use. "The Board seeks to impose an unequal share of the burden of the 911 infrastructure on Lifeline providers.”