UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


CITY ABILENE TX

v.

FCC


97-1633a

D.C. Cir. 1999


*	*	*


Randolph, Circuit Judge: The State of Texas has a law  prohibiting its
municipalities from providing telecommunica- tions services. The
United States has a law against state  statutes that bar "any entity"
from this line of business. If a  Texas municipality is "any entity,"
the Supremacy Clause,  U.S. Const. art. VI, cl. 2, would render the
Texas law a  nullity, or so it is claimed. In legal parlance, the
federal law  would "preempt" the state law. The question here is
whether  the Federal Communications Commission, which administers  the
federal law, rightly decided that the Texas law is not  preempted.


The west-central Texas city of Abilene, population 106,000,  convened a
task force to study the city's technological  "needs." The task force
believed Abilene's businesses and  residents should have "two-way
audio, video and data trans-


mission capabilities." According to the city, the local ex- change
company is unwilling to upgrade its system for this  purpose. The city
wants to fill the gap, or at least wants to  consider doing so. A
Texas statute stands in the way. It  requires those seeking to provide
local exchange telephone  service, basic local telecommunications
service, or switched- access service to obtain a particular type of
certificate. See  Texas Public Utility Regulatory Act of 1995 s
3.251(c) (codi- fied at Tex. Util. Code Ann. ss 54.001, 54.201-.202
(West  1998) ("Texas Utility Act").1 This 1995 Texas law also ren-
ders municipalities ineligible for the certificates and forbids  them
from selling, "directly or indirectly," telecommunica- tions services
to the public. Id. s 3.251(d).


Thwarted on the State front, the city of Abilene turned to  the Federal
Communications Commission. The city peti- tioned for a declaratory
ruling that a provision in the Tele- communications Act of 1996, Pub.
L. No. 104-104, 110 Stat.  56, preempted the Texas law. The
provision--s 253(a)--is as  follows: "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." 47 
U.S.C. s 253(a).2 The Commission denied the petition on the  


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n 1 Until 1997, these portions of the Texas Utility Act were  codified
at Tex. Rev. Civ. Stat. Ann. art. 1446c-0 (West Supp. 1996).


2 In its entirety, s 253 provides:


(a) 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.


(b) Nothing in this section shall affect the ability of a State  to
impose, on a competitively neutral basis and consistent with  section
254 of this section, requirements necessary to preserve  and advance
universal service, protect the public safety and  welfare, ensure the
continued quality of telecommunications  services, and safeguard the
rights of consumers.


(c) Nothing in this section affects the authority of a State or  local
government to manage the public rights-of-way or to 


ground that Congress, in using the word "entity" in s 253(a),  had not
expressed itself with sufficient clarity to warrant  federal
interference with a State's regulation of its political  subdivisions.
See In re: Public Util. Comm'n of Texas, 13  F.C.C.R. 3460, 3547
(1997). The city, joined by the American  Public Power Association,
petitioned for judicial review. Oth- er parties intervened for and
against the city's position.


In deciding this case we shall assume arguendo that Con- gress, acting
within its constitutional authority, may-- through the Supremacy
Clause--supersede a State law limit- 


__________

n require fair and reasonable compensation from telecommunica- tions
providers, on a competitively neutral and nondiscriminato- ry basis,
for use of public rights-of-way on a nondiscriminatory  basis, if the
compensation required is publicly disclosed by such  government.


(d) If, after notice and opportunity for public comment, the 
Commission determines that a State or local government has  permitted
or imposed any statute, regulation, or legal require- ment that
violates subsection (a) or (b) of this section, the  Commission shall
preempt the enforcement of such statute,  regulation, or legal
requirement to the extent necessary to  correct such violation or


(e) Nothing in this section shall affect the application of  section
332(c)(3) of this title to commercial mobile service  providers.


(f) It shall not be a violation of this section for a State to  require
a telecommunications carrier that seeks to provide  telephone exchange
service or exchange access in a service  area served by a rural
telephone company to meet the require- ments in section 214(e)(1) of
this title for designation as an  eligible telecommunications carrier
for that area before being  permitted to provide such service. This
section shall not  apply- (1) to a service area served by a rural
telephone company  that has obtained an exemption, suspension, or
modification of  section 251(c)(4) of this title that effectively
prevents a competi- tor from meeting the requirements of section
214(e)(1) of this  title; and (2) to a provider of commercial mobile


ing the powers of the State's political subdivisions. We put  the
matter in terms of limiting a municipality's powers be- cause in Texas
"home rule" cities like the city of Abilene,  although deriving their
powers from the state constitution,  are subject to state legislative
restrictions on those powers.  See Tex. Const. art. XI, s 5; see also
Lower Colorado River  Auth. v. City of San Marcos, 523 S.W.2d 641,
643-44 (Tex.  1975); Zachry v. City of San Antonio, 296 S.W.2d 299,
301  (Tex. Civ. App. 1956), aff'd, 305 S.W.2d 558 (Tex. 1957). 
Whatever the scope of congressional authority in this regard, 
interfering with the relationship between a State and its  political
subdivisions strikes near the heart of State sover- eignty. Local
governmental units within a State have long  been treated as mere
"convenient agencies" for exercising  State powers. See Sailors v.
Board of Educ., 387 U.S. 105,  107-08 (1967); see also Wisconsin Pub.
Intervenor v. Morti- er, 501 U.S. 597, 607-08 (1991). And the
relationship between  a State and its municipalities, including what
limits a State  places on the powers it delegates, has been described
as  within the State's "absolute discretion." Sailors, 387 U.S. at 


For these reasons, we are in full agreement with the  Federal
Communications Commission that s 253(a) must be  construed in
compliance with the precepts laid down in Grego- ry v. Ashcroft, 501
U.S. 452 (1991). To claim, as the city of  Abilene does, that s 253(a)
bars Texas from limiting the  entry of its municipalities into the
telecommunications busi- ness is to claim that Congress altered the
State's governmen- tal structure. Gregory held that courts should not
simply  infer this sort of congressional intrusion: "States retain
sub- stantial sovereign powers under our constitutional scheme, 
powers with which Congress does not readily interfere." 501  U.S. at
461. Like the Commission, we therefore must be  certain that Congress
intended s 253(a) to govern State-local  relationships regarding the
provision of telecommunications  services. This level of confidence
may arise, Gregory in- structs us, only when Congress has manifested
its intention  with unmistakable clarity. See 501 U.S. at 460. Federal
law,  in short, may not be interpreted to reach into areas of State 


sovereignty unless the language of the federal law compels  the
intrusion.3


Section 253(a) fails this test. The first thing one notices  about the
provision is the oddity of its formulation. It  invalidates State laws
that "prohibit" an entity's "ability" to  do something, namely, to
provide telecommunications ser- vices. This sounds strange because one
would not have  supposed that an entity's "ability" to furnish these
services  turned on a State's permission. That aside, the question 
remains whether the category of those whose "ability" may  not be
impinged by State law--"any entity"--includes munici- palities. To
place municipalities in that category would be to  protect them from
State laws restricting their governmental  activities. In contending
that s 253(a) has this effect, Abilene  thinks it important that the
provision places the modifier  "any" before the word "entity." If we
were dealing with the  spoken word, the point might have some
significance, or it  might not, depending on the speaker's tone of
voice. A  speaker, by heavily emphasizing the "any" in "any entity," 
might be able to convey to his audience an intention to  include every
conceivable thing within the category of "enti- ty." But we are
dealing with the written word and we have  no way of knowing what
intonation Congress wanted readers  to use. All we know is that
"entity" is a term Congress left  undefined in the Telecommunications
Act.4 The term may  include a natural person, a corporation, a
partnership, a  limited liability company, a limited liability
partnership, a  trust, an estate, an association. See Alarm Indus.
Communi- cations Comm. v. FCC, 131 F.3d 1066 (D.C. Cir. 1997). 
Abilene maintains that it is also linguistically possible to  include


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n 3 We made a similar point in Commonwealth of Virginia v.  EPA when we
wrote that a court "would have to see much clearer  language to
believe a statute allowed a federal agency to intrude so  deeply into
state political processes." 108 F.3d 1397, 1410 (D.C.  Cir. 1997),
partial reh'g granted, 116 F.3d 499 (D.C. Cir. 1997).


4 Abilene cites only sections of the Telecommunications Act  defining
terms other than "entity." See Petitioners' Brief at 31.


5 But see Sailors, 387 U.S. at 107 (quoting Reynolds v. Sims,  377 U.S.
533, 575 (1964)): "Political subdivisions of States--coun-


not enough that the statute could bear this meaning. If it  were,
Gregory's rule of construction would never be needed.  Gregory's
requirement of a plain statement comes into play  only when the
federal statute is susceptible of a construction  that intrudes on
State sovereignty. Other than the possibility  just mentioned, Abilene
offers nothing else, and certainly no  textual evidence, to suggest
that in using the word "entity,"  Congress deliberated over the effect
this would have on  State-local government relationships or that it
meant to au- thorize municipalities, otherwise barred by State law, to
enter  the telecommunications business.


Abilene points out that s 253 contains two other subsec- tions
explicitly restricting the scope of preemption and pre- serving State
regulatory authority over telecommunications  services. See 47 U.S.C.
s 253(b), (c). From this, it draws  the conclusion that Congress meant
to reserve to the States  only very narrow powers. We think the
opposite conclusion  follows. The two subsections--s 253(b) and
(c)--set aside a  large regulatory territory for State authority.
States may act  to preserve and advance universal service, protect the
public  safety and welfare, ensure the continued quality of telecom-
munications services, safeguard the rights of consumers, man- age the
public rights-of-way, and require fair and reasonable  compensation
from telecommunications providers for use of  public rights-of-way.
See 47 U.S.C. s 253(b), (c). In any  event, the fact that Congress, in
other parts of s 253, ex- pressly reserved certain powers to the
States does not make  s 253(a) into the sort of clear expression
Gregory requires for  congressional interference with a State's
regulation of its  political subdivisions.


Abilene tells us that Congress "would surely have inserted  the word
'private' between 'any' and 'entity' in Section 253(a)"  if it had not
wanted to limit the power of States over their  local units.
Petitioners' Brief at 32. The argument is mis- taken. Any statute
failing the Gregory standard, that is, any  statute not clearly
including matters within the core of State 




__________

n ties, cities or whatever--never were and never have been consid- ered
as sovereign entities."


sovereignty, could be rewritten to exclude those matters.  The
question Gregory addresses is what to do when the text  fails to
indicate whether Congress focused on the effect on  State sovereignty.
Gregory's answer is--do not construe the  statute to reach so far.6


Abilene cites two previous Commission decisions as if these  could
alter the analysis Gregory demands.7 In re: IT&E  Overseas, Inc., 7
F.C.C.R. 4023 (1992), did not concern federal  preemption of
traditional state powers. It involved an at- tempt by Guam, a U.S.
territory, to exercise traditional  federal powers by asserting
jurisdiction over interstate and  foreign common carrier
communications. See 7 F.C.C.R. at  4023. To ensure that Guam did not
usurp the Commission's  exclusive authority to regulate, the
Commission construed the  term "any corporation" as used in another
provision of the  Communications Act of 1934, 47 U.S.C. s 153, to
include  public corporations such as Guam's publicly-owned telephone 
company. See 7 F.C.C.R. at 4025. That decision furthered  Congress's
clearly expressed intent in 47 U.S.C. s 151 to  "centraliz[e]
authority . . . with respect to interstate and  foreign commerce in
wire and radio communication" in one  federal agency (the Commission).
In contrast, Congress did  not express any clear intent in s 253(a) to
transfer to the  Commission the states' traditional power to regulate
their  subdivisions. Nor is the Commission's interpretation of "enti-
ty" inconsistent with its decision in In re: Classic Telephone, 




__________

n 6 In deciding whether the Age Discrimination in Employment  Act of
1967 ("ADEA") preempted a Missouri law requiring certain  judges to
retire at age seventy, Gregory made the point this way:  "in this case
we are not looking for a plain statement that judges  are excluded
[from the ADEA's coverage]. We will not read the  ADEA to cover state
judges unless Congress has made it clear that  judges are included."
501 U.S. at 467.


7 In a brief, one-paragraph appeal to "legislative history" con-
sisting of a committee report and two post-enactment letters from 
Members of Congress, Abilene fails to acknowledge that the state-
ments it quotes deal with an issue not before us--whether public 
utilities are entities within s 253(a)'s meaning. See Petitioners' 
Brief at 33, 15-17.


Inc., 11 F.C.C.R. 13,082 (1996). There, the Commission  overrode the
refusals of two Kansas municipalities to grant  telephone franchise
applications to Classic Telephone, Inc.  See 11 F.C.C.R. at 13,083.
The Kansas cities were violating  s 253(a) by banning entry to all but
one local telephone  service provider. See 11 F.C.C.R. at 13,095-97.
The case is  not at all comparable to the one before us. The Texas
Utility  Act restricts all municipalities from providing
telecommunica- tions services. The question here is whether s 253(a)
re- lieves municipalities from this restriction. Section 253(a)  could
have this affect only if a municipality were considered  an "entity."
Classic Telephone has nothing to say on this  subject.


No useful purpose would be served by setting forth Abi- lene's other
arguments. We have considered and rejected  them. The critical point
is that it was not plain to the  Commission, and it is not plain to
us, that s 253(a) was meant  to include municipalities in the category
"any entity." Under  Gregory, the petition for judicial review must
therefore be  denied.


So ordered.