Ninth Circuit Upholds California LifeLine's $0 Rate Requirement

On January 31, the U.S. Court of Appeals for the Ninth Circuit upheld a 2020 order by the California Public Utility Commission' (CPUC) that required all wireless provider participants in the state's LifeLine Program to offer at least one plan with a $0 co-payment to low-income subscribers. In National Lifeline Association v. Batjer, the Ninth Circuit reversed a lower court had ruled that the CPUC's order conflicted with Section 332(c)(3)(A). That section bars states from regulating rates for wireless services. But the Ninth Circuit concluded that the CPUC's $0 co-payment requirement did not amount to rate regulation; instead, it was a condition for a wireless provider's voluntary participation in the California LifeLine Program.

According to the Ninth Circuit's opinion: 

California is not engaged in rate regulation within the meaning of § 332(c)(3)(A) because service providers may leave and set their own rates if they do not wish to comply with the California LifeLine's subsidy requirements. The 2020 Rule sets requirements for voluntary participation in California LifeLine to advance universal service…

 

[T]he 2020 Rule does not require all California service providers to offer certain services to consumers at specific rates; the rule applies only to those that desire a state subsidy. That some NLA members might lose money providing affordable plans to low-income consumers because they cannot charge a co-pay for certain plans is of no moment under § 332(c)(3)(A): service providers may forgo the state subsidy and set their own rates if they do not wish to comply with the 2020 Rule's eligibility conditions. The rule therefore does not directly control—and thus does not impermissibly regulate—the rates that providers may set. 

My December 13, 2022 Perspectives from FSF Scholars, "The Ninth Circuit Should Uphold Preemption of State Controls on Wireless Services" analyzed the legal issues raised in Batjer. In that Perspectives, I suggested that the court reach a conclusion that is contrary to the one that it ultimately handed down on January 31. But given the voluntary nature of the California Lifeline Program, the court's decision is understandable. Underscoring the limited applicability of its decision, the court designated its opinion as "not for publication," meaning that it will not be a precedent that may be cited as binding authority in future federal court cases. 

 

Notwithstanding the Ninth Circuit's decision in Batjer, Section 332(c)(3)(A)'s express preemption provision remains an indispensable part of federal policy for wireless services. Barring state regulation of wireless rates and entry has fostered a pro-market environment in which investment, innovation, and competition in wireless services continue to thrive and to benefit consumers with a variety of advanced service options, including 5G.