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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) New England Public Communications) CCB Pol 96-11 Council Petition for Preemption ) Pursuant to Section 253 ) MEMORANDUM OPINION AND ORDER Adopted: April 18, 1997 Released: April 18, 1997 I. INTRODUCTION 1. On January 7, 1997, the State of Connecticut Department of Public Utility Control (DPUC) filed a Petition for Reconsideration of the Commission's New England Preemption Order pursuant to section 1.106 of the Commission's rules. For the reasons discussed below, we deny the Petition for Reconsideration. II. BACKGROUND 2. In the New England Preemption Order, the Commission exercised its authority under the Supremacy Clause and sections 253(d) and 276(c) of the Communications Act of 1934, as amended (the Communications Act or the Act), to preempt enforcement of the DPUC's decision that prohibits all entities except incumbent and certified local exchange carriers (LECs) from providing pay telephone service in the State of Connecticut. The Commission found that the DPUC Decision violates section 253(a) of the Communications Act because it bars independent payphone providers from providing an interstate or intrastate telecommunications service. The Commission also found that the DPUC Decision does not fall within the protected class of state regulation described in section 253(b), because it is neither competitively neutral nor necessary to protect consumers. For similar reasons, the Commission found, as an alternative ground for its decision, that the DPUC Decision is inconsistent with the payphone provision of the Act, section 276, and the Commission's rules implementing that section. As of December 16, 1996, section 64.1330(a) of these rules requires the DPUC to review and remove regulations that impose payphone market entry and exit requirements. III. POSITIONS OF THE PARTIES 3. The DPUC advances four arguments in support of its request that we reconsider the New England Preemption Order: (1) the Order improperly deprives the DPUC of its authority under section 253(b) to protect consumers from abusive practices; (2) the Ordererroneously concludes that the DPUC Decision is not "necessary" under section 253(b) to protect consumers from abusive practices, particularly given the inherent difficulties in policing payphone practices; (3) the Order construes the term "necessary" in section 253(b) differently from the Commission's construction of "necessary" elsewhere in the Act; and (4) the Orderconstrues the term "necessary" in section 253(b) as imposing a "least restrictive alternative" standard, which conflicts with congressional intent. 4. The American Public Communications Council (APCC) and the New England Public Communications Council, Inc. (NEPCC) filed oppositions to the DPUC's Petition for Reconsideration, arguing that the Commission correctly decided the New England Preemption Order. NEPCC and APCC maintain that the DPUC Decision violates section 253(a) by prohibiting the ability of independent payphone providers to provide any payphone service in Connecticut. They also argue that section 253(b) does not shield the DPUC Decision from preemption, because (i) the DPUC Decision violates competitive neutrality by banning one class of providers and not others; (ii) section 253(b) does not create an exception to section 253(a);(iii) the DPUC Decision exceeds what is necessary to protect consumers by imposing the most competitively restrictive option; and (iv) the term "necessary" in section 253(b) has a different meaning from the term "necessary" in sections 251(c)(6) and 251(d)(2)(A) of the Act, because those sections have different purposes and legislative histories. Finally, both APCC and NEPCC observe that the DPUC's Petition ignores the finding in the New England Preemption Order that the DPUC Decision conflicts with section 276 and rules promulgated thereunder by imposing market entry requirements and precluding competition in payphone services. According to APCC and NEPCC, that finding establishes an independent basis for preemption. IV. DISCUSSION 5. Our New England Preemption Order concludes that the DPUC Decision, on its face, conflicts with the pro-competitive policies of the 1996 Act and violates section 253(a), because the DPUC Decision prohibits a certain class of telecommunications service providers, i.e., independent payphone providers, from offering interstate or intrastate payphone services in Connecticut. Our New Preemption England Order also concludes that section 253(b) does not protect the DPUC Decision from preemption, because the DPUC Decision singles out one class of competitors for exclusion and fails to demonstrate the necessity of imposing the most restrictive means available to protect consumers. Our New England Preemption Order further concludes that the term "necessary" in section 253(b) has a different and more limited meaning than the term "necessary" in sections 251(c)(6) and 251(d)(2)(A), because such an interpretation prevents the section 253(b) exception from swallowing the section 253(a) rule and fosters the overall pro-competitive, de-regulatory framework that Congress sought to establish through the 1996 Act. Finally, based on factors similar to those just stated, our New England Preemption Order concludes, as an alternative ground for its decision, that the DPUC Decisionimpermissibly conflicts with the purpose of section 276 and the Commission's rules implementing that section to promote competition in the provision of payphone services. 6. In reaching those conclusions, our New England Preemption Order discusses fully and rejects all but one of the arguments raised by the DPUC in its Petition for Reconsideration. Specifically, the New England Preemption Order addresses and rejects the arguments that (1) the DPUC Decision to prohibit all entities except incumbent and certified LECs from providing payphone services in Connecticut falls within the authority reserved to Connecticut under section 253(b); (2) the DPUC Decision is "necessary" within the meaning of section 253(b) to protect consumers from abusive practices; and (3) our construction of "necessary" in section 253(b) impermissibly differs from our construction of "necessary" in other provisions of the Act. Thus, with respect to these challenges, the DPUC has presented no new arguments that would warrant reconsideration of the New England Preemption Order. 7. The one new argument raised by the DPUC is that the New England Preemption Order's construction of the term "necessary" in section 253(b) conflicts with congressional intent by allegedly requiring states to use the least restrictive alternative when regulating telecommunications services to safeguard the rights of consumers. The DPUC misconstrues our New England Preemption Order. Contrary to the DPUC's misinterpretation, the New England Preemption Order concludes that (i) the term "necessary" as used in the context of section 253(b) means something more than just "used," "useful," or "a prerequisite for competition," and (ii) under the specific circumstances set forth in the record, the DPUC had not shown that the most restrictive means available -- a flat prohibition against non-LECs providing payphone services within the State -- was necessary to protect payphone customers. Therefore, the DPUC's one new argument provides no basis for changing the decision we reached in the New England Preemption Order. 8. We further note that the DPUC's Petition for Reconsideration makes no mention of our conclusions in the New England Preemption Order that the Supremacy Clause and section 276(c) of the Act authorize us to preempt the DPUC Decision as inconsistent with section 276 and the Commission's implementing rules. As we stated in the New England Preemption Order, those conclusions constitute "independent grounds" for preemption. Consequently, the DPUC's failure to challenge those conclusions constitutes an independent ground for affirming our determination to preempt enforcement of the DPUC's decision to prohibit all entities except incumbent and certified LECs from providing pay telephone service in the State of Connecticut. V. ORDERING CLAUSE 9. Accordingly, IT IS ORDERED, pursuant to sections 253, 276, and 405 of the Communications Act of 1934, as amended, 47 U.S.C.  253, 276, and 405, and section 1.106 of the Commission's rules, 47 C.F.R.  1.106, that the Petition for Reconsideration filed by the State of Connecticut Department of Public Utility Control IS DENIED. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary