On September 27, 2018, the Federal Communications Commission (“FCC” or “Commission”) released the final text of a Declaratory Ruling and Third Report and Order accelerating the deployment of wireless infrastructure. The Commission’s action has two main parts: in the Declaratory Ruling, the Commission “definitively interpret[s]” limitations on state and local governments in Sections 253 and 332(c)(7)(B)(i)(II) of the Communications Act; in the Third Report and Order, the FCC promulgates rules imposing new “shot clocks” for Small Wireless Facility application review and codifies and clarifies existing shot clocks for all wireless facilities.

The Declaratory Ruling is an important next step in the Commission’s recent actions to promote the deployment of next generation wireless infrastructure and services and to overcome state and local regulations and fees that at times thwarted such deployment. By clearly articulating the correct interpretation of Sections 253 and 332, and rejecting the narrow interpretations imposed by some courts, the Commission restores the balance in favor of deployment consistent with the language and intent of the Telecommunications Act of 1996.

A. Declaratory Ruling: Clarifying Provisions of the Communications Act

In the Declaratory Ruling section, the FCC resolves the “different and often conflicting views regarding the scope and nature of the limits Congress imposed on state and local governments through Sections 253 and 332” in light of Congress’ vision for a consistent national framework for siting communications facilities. The FCC clarifies and updates its interpretation of those congressional limits.

At the outset, the FCC explains that its Declaratory Ruling applies equally to the “effective prohibition” standard that appears in both Sections 253(a) and 332(c)(7). Moreover, while much discussion centers on the need for streamlined processes to deploy Small Wireless Facilities, the Commission’s effort to clarify the Act is not limited to Small Wireless Facilities; the Commission’s legal analysis is not limited to any specific facility, and much of its analysis focuses on cases that concern larger macro wireless facilities.

1. Commission Reaffirms the California Payphone Standard For Determining Effective Prohibition of Service

The FCC reaffirms as its “definitive interpretation of the effective prohibition standard” the test set forth in its California Payphone decision, which states that a state or local legal requirement is an “effective prohibition” of service if it “materially limits or inhibits the ability of any competitor or potential competitor to compete in a fair and balanced legal and regulatory environment.” In so doing, the FCC confirms the precept that a legal requirement can “materially inhibit” service even if it is not an “insurmountable barrier.”

The FCC clarifies that under Section 253(a) or 332(c)(7)(B)(i)(II), “an effective prohibition [of service] occurs where a state or local legal requirement materially inhibits a provider’s ability to engage in any of a variety of activities related to its provision of a covered service.” The FCC makes clear that a state or local legal requirement effectively prohibits the provision of wireless services if it inhibits or limits a provider “not only when filling a coverage gap but also when densifying a wireless network, introducing new services or otherwise improving service capabilities.” Under this standard, preventing an existing provider from delivering service to a new area, restricting the entry of a new provider in a given area, or materially inhibiting the introduction of new service or the improvement of existing services all create unlawful “effective prohibitions” of service. The FCC also makes clear that an effective prohibition includes inhibiting a provider from deploying the “performance characteristics” of its choosing.

In an action that will impact the deployment of not just Small Wireless Facilities but also macro sites, the FCC rejects the “significant gap” standard adopted by many Circuit Courts. The FCC explains that its ruling “reflects and supports a marketplace in which services can be offered in a multitude of ways with varied capabilities and performance characteristics . . . .” The FCC clarifies that it is rejecting court-created standards requiring a showing of both a significant gap in service and an analysis of alternatives. In response to an inquiry by local governments, the Commission states that it is rejecting “both the version of the ‘coverage gap’ test followed by the First, Fourth, and Seventh Circuits (requiring applicants to show ‘not just that this application has been rejected but that further reasonable efforts to find another solution are so likely to be fruitless that it is a waste of time even to try’) and the version endorsed by the Second, Third, and Ninth Circuits (requiring applicants to show that the proposed facilities are the ‘least intrusive means’ for filling a coverage gap).”

The FCC also overrules the Eighth and Ninth Circuits’ interpretation of Section 253(a), which required a showing of “an existing or complete inability to offer a telecommunications service,” finding this approach “contrary to the material inhibition standard of California Payphone” and at odds with statutory purposes and goals of the Act.

Ultimately, as also reflected in its fee analysis discussed below, the Commission emphasizes that telecommunications networks are not just local, but have regional, state, and national impacts. Accordingly, the Commission emphasizes that whether a local government requirement imposes an effective prohibition is not limited to the impact in that community, but must be viewed in light of the broader impact on regional or national deployment efforts.

2. State And Local Fees Are Limited To Cost Recovery

In a critical portion of the Declaratory Ruling, the Commission resolves the judicial confusion regarding the limits on state and local fees. The Commission articulates the standards for when a state or local fee applied to Small Wireless Facility deployment is preempted.

As a threshold matter, the Commission makes clear that the limits of Sections 253 and 332(c)(7)(B) apply not only to fees for use of public rights of way, but also to fees for use of government property in the right of way, including light poles, traffic poles, utility poles, and other similar property suitable for hosting Small Wireless Facilities. The Commission also makes clear that the fee restrictions are not limited to recurring right of way fees, but instead apply to “application,” “review,” “siting,” “zoning,” “building permit,” or any other similar fees imposed as part of regulation of Small Wireless Facilities inside and outside the right of way.

The Commission holds that all fees imposed in connection with a provider’s use of the right of way to deploy Small Wireless Facilities violate Section 253 or Section 332(c)(7) unless:

1. The fees are a “reasonable approximation of the state or local government’s costs” that are “specifically related to and caused by the deployment;”2. The fees include only “reasonable costs;” and3. The fees are “no higher than the fees charged to similarly-situated competitors in similar situations.”

Applying its ruling, the Commission makes clear that “excessive and arbitrary consulting fees or other costs” are not reasonable and may not be passed through to applicants, even though they are “costs” to the government.

Critically, the Commission emphasizes that local fees cannot be imposed on some providers and not others, even if cost based, and notably, local governments cannot discriminate against wireless technologies versus others technologies by claiming they are not “similarly-situated.” For example, the Commission states that its interpretation is consistent with the principles of “neutral treatment and access of all technologies and communications providers based upon extent/nature of ROW use.”

A key element of the Commission’s analysis is its agreement with the First Circuit that the impact of local fees is not limited to the impact the fee would have on deployment only in the jurisdiction imposing the fee. The Commission emphasizes the aggregate effect of fees when totaled across all jurisdictions, explaining that allowing certain wealthy communities that might be most critical for a company to serve to leverage their unique power to extract fees for their own benefit would be at the expense of wider regional or national deployment.

The Commission ultimately provides a set of fee levels likely to comply with Section 253, which it describes as “a presumptively reasonable safe harbor:”

(a) $500 for non-recurring fees, including a single up-front application that includes up to five Small Wireless Facilities, with an additional $100 for each Small Wireless Facility beyond five, or(b) $1,000 for non-recurring fees for a new pole (not a collocation) to support one or more Small Wireless Facilities; and(c) $270 per Small Wireless Facility per year for all recurring fees, including any right of way access fee or municipal pole attachment.

One key question is the impact of the Commission’s Order on previously executed franchise or similar agreements. The Commission states that it does not exempt existing agreements or particular provisions thereof from the statutory requirements it is interpreting. However, the Commission leaves the possibility that in some cases an existing agreement may have enforceable provisions based on potentially unique circumstances.

3. Aesthetic, Undergrounding, and Minimum Spacing Requirements that Violate the Act

Applying its interpretation of Sections 253 and 332, the FCC provides guidance on some, but not all, potential regulations imposed by local governments.

Aesthetic Regulations -- The Commission clarifies that local aesthetic requirements on facilities must meet three criteria to be permissible under the Act. The FCC explains that “aesthetics requirements are not preempted if they are (1) reasonable, (2) no more burdensome than those applied to other types of infrastructure deployments, and (3) objective and published in advance.” The FCC further clarifies that to be “reasonable,” aesthetic requirements must be “technically feasible and reasonably directed to avoiding or remedying the intangible public harm of unsightly or out-of-character deployments . . . . The FCC notes that aesthetic requirements imposed on certain types of facilities that are more burdensome than those applied to similar infrastructure deployments would show that the requirement is being applied in a discriminatory fashion and is not, in fact reasonable. The FCC clarifies that an “objective” aesthetic requirement “must incorporate clearly-defined and ascertainable standards,” which would be “applied in a principled manner.” Finally, the FCC explains that if aesthetic requirements are not published in advance, a provider cannot design or implement a rational plan for deploying its facilities.

Undergrounding Requirements -- The FCC also specifically addresses undergrounding requirements and minimum spacing requirements. The FCC reports that some jurisdictions have requirements that infrastructure be deployed underground, based in part on aesthetic concerns. The FCC notes that a blanket requirement that all wireless facilities be deployed underground “would amount to an effective prohibition given the propagation characteristics of wireless signals.” The Commission concludes that the aesthetics criteria apply to undergrounding requirements.

Minimum Spacing Requirements -- Importantly, the FCC points out that a minimum spacing requirement preventing a provider from replacing preexisting facilities or collocating equipment on an existing structure would likely be unreasonable. This will have a significant impact on many local governments, which have imposed minimum spacing between Small Wireless Facilities that would effectively prohibit use of available utility poles. Finding that both local undergrounding requirements and minimum spacing requirements are both functionally aesthetic requirements, the FCC determines that both types of requirements will be evaluated under the general aesthetic criteria described above.

The FCC notes that local jurisdictions may require time to develop and publish aesthetic requirements consistent with the Declaratory Ruling, and “anticipate[s]” that jurisdictions publish such requirements no later than 180 days after the Declaratory Ruling is published in the Federal Register.

4. States and Localities Act in Regulatory Capacities

Although the Commission has previously held that Section 253 governs access to state and local government-owned property, the FCC again confirms that its interpretation in the Declaratory Ruling extends not only to public rights-of-way, but also to the terms for use of or attachment to government property within the right-of-way, including light poles, traffic signal poles, utility poles, and other property. In so doing, the FCC rejects claims that states or local governments providing or denying access to government-owned structures are solely acting as “market participants” not subject to the Act. The FCC also interprets Section 253(c)’s requirements, including regarding compensation, as applying equally to charges imposed via contracts and other arrangements.

B. Third Report and Order Establishing New Shot Clocks for Small Wireless Facilities and Clarifying Application of Existing Shot Clocks

In the Third Report and Order, the Commission adopts new “shot clocks” on application review timeframes specific to Small Wireless Facilities (a term now defined by the FCC at 47 C.F.R. § 1.6002(l)) and clarifies the application of its existing shot clocks under Section 332.

1. New Shot Clocks for Small Wireless Facilities

The Commission establishes the following application review timeframes for Small Wireless Facilities: (1) 60 days for collocations of Small Wireless Facilities on existing structures and (2) a shot clock of days 90 days for new construction of Small Wireless Facilities. The Commission notes that local governments have created process efficiencies in completing their review of siting applications, and the Commission has confidence that localities can “complete reviews more quickly” than when the original shot clocks were introduced in 2009.

The Commission clarifies aspects of the timing of these new Small Wireless Facilities shot clocks. Importantly, for Small Wireless Facility shock clocks only, the Commission allows a local government to reset the shot clock to zero if the local government provides written notice of a material deficiency in the application within ten days of submission. The new rules make clear that to stop the shot clock, the written notice must “clearly and specifically identify” the missing documents or information and the specific rule or regulation creating the obligation to submit such documents or information. Thus, local governments cannot simply declare applications incomplete. The clock can only be reset if there is information missing that was required in rules or regulations published in advance.

Once the applicant submits the missing information, the clock will reset, beginning the sixty or ninety day shot clock timing anew. Any subsequent notice of incompleteness would be subject to the non-Small Wireless Facility tolling rules requiring written notice provided within ten days of the supplemental submission explaining what information identified in the original notice was still not present in the submission. Those subsequent notices would only toll the shot clock, not reset it.

a. Batched applications

The Commission also addresses “batched” applications for Small Wireless Facilities. “Batched applications” (defined as “multiple separate applications filed at the same time, each for one or more sites or a single application covering multiple sites”) should not be treated the same as individual applications filed separately. Thus, “the shot clock that applies to the batch is the same one that would apply had the applicant submitted individual applications.” If the batch includes both collocated facilities and new freestanding facilities, the longer 90-day Small Wireless Facility shot clock will apply. Under extraordinary circumstances, local government has the burden to prove that a batched application “causes legitimate overload on the siting authority’s resources.”

b. New Remedy for Small Wireless Facility Shot Clock Violations

In adopting Small Wireless Facility shot clocks, the FCC reaffirms that the existing remedy for a “failure to act” under Section 332(c)(7)(B)(v) will be available to applicants, but adds an additional remedy specific to these new Small Wireless Facility shot clocks. The FCC clarifies that failure to adhere to the FCC’s Small Wireless Facility shot clock deadlines also amounts to a presumptive prohibition of service in violation of Section 332(c)(7)(B)(i)(II). Because violating the shot clock creates an effective prohibition of service, the Commission expects that the applicant would have “straightforward case” for obtaining expedited relief in court via a preliminary or permanent injunction. The Commission outlines how this presumption will allow litigants to pursue Section 332(c)(7)(B)(v) cases in courts. The Commission declines to adopt a “deemed granted” remedy, however, because the Commission believes that these measures and “substantive guiding principles” for adjudication will provide applicants adequate relief.

2. Clarifications Regarding All Section 332 Shot Clocks

The Commission also clarifies certain issues related to all Section 332(c)(7) shot clocks. As an administrative matter, the FCC codifies in its rules all of the shot clocks for processing siting applications under Section 332, including those that do not involve Small Wireless Facilities, at 47 C.F.R. § 1.6001 et seq.

The FCC also clarifies that the shot clock applies to all authorizations necessary for the deployment of personal wireless services infrastructure, and is not limited to decisions of zoning authorities. The FCC notes that localities may require building permits, road closure permits, or other similar approvals to construct or modify these facilities, and thus all approvals should be subject to the same statutory timeframe.

While declining to make any changes to the Commission’s prior determinations regarding when the existing Section 332 shot clocks start or when an application is deemed complete, the Commission clarifies that mandatory pre-application procedures do not toll the shot clock. If a state or local government refuses to accept a siting application due to a mandatory pre-application review process, the Commission explains that the request is “duly filed” and the shot clock will begin to run when the application is initially provided to the locality.

The FCC also clarifies that the 90-day collocation shot clock under Section 332 applies regardless whether the structure or the location has previously been zoned for wireless facilities. In so finding, the FCC notes that the Nationwide Programmatic Agreement’s “definition of collocation explicitly encompasses collocations on structures and buildings that have not yet been zoned for wireless use.”

Finally, the FCC reiterates that remedies granted under the Act are independent of, and in addition to, any remedies available under state or local law.

C. Effective Date

Although under typical FCC procedure the Declaratory Ruling would be effective immediately upon release, the Commission provides that the Third Report and Order, new rules, and the Declaratory Ruling will all be effective 90 days after the Third Report and Order is published in the Federal Register.