The FCC’s small cells order (Declaratory Ruling and Third Report and Order, WT Dk. No. 17-79 and WC Dk. No 17-84, released September 27, 2018) is a big win for the wireless industry.  The FCC largely adopted the industry’s vision that deployment of 5G technology will require hundreds of thousands of so-called “small cell” sites in commercial and residential areas throughout the country and that longstanding state and local wireless siting rules and practices irrevocably impair that vision. To “win the 5G war with China,” the FCC interpreted key provisions of the Communications Act to extend unprecedented federal authority for carrier deployment of small cell sites in the public rights-of-way (ROW), at the expense of state and local governments’ historic land-use authority to manage the ROW.

Broad Interpretation of State and Local Prohibitions – The Commission broadly interpreted Sections 332(c)(7)(B)(i)(II) and Section 253(a) of the Communications Act that limit state or local laws, regulations and other legal requirements that “prohibit or have the effect of prohibiting” the provision of wireless service. In so doing, the Commission emphasized that a state or local legal requirement constitutes an effective prohibition 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.” The standard adopted in this order allows that a “requirement can constitute an effective prohibition of services even if it is not an insurmountable barrier.”

Longstanding local prerogatives over managing access to public rights of way were largely swept away. In its carrier-centric interpretations, the Commission significantly limited “the authority of a State or local government to manage the public rights-of-way” and “to require fair and reasonable compensation from telecommunications providers” under Section 253 (c) of the Act.

Cost-Based Fees –A significant wireless industry victory pertains to the FCC’s determinations on allowable compensation for carrier use of the ROW. The FCC ruled that under Sections 253(c) and 332(c)(7) state and local governments are limited to charging fees that are no greater than “a reasonable approximation” of their costs for processing applications and for managing deployments in the rights-of-way. This ruling applies to fees for access to public rights-of-way and for attachments to government-owned property in the rights-of-way including “light poles, traffic lights, utility poles, and other similar property.” While the decision expressly excludes access or attachments to government-owned property located outside the public rights-of-way, the order requires that application or review fees for facilities outside the ROW must be cost-based.

Many local communities had argued that the “fair and reasonable compensation” clause contained in Section 253(c) of the Act embodied the intent of Congress that telecommunications providers could be charged market-based fees for use of public rights-of-way. In rejecting this approach, the Commission found that “although there is precedent that ‘fair and reasonable’ compensation could mean … market-based charges in certain instances, the statutory context persuades us to adopt a cost-based interpretation here.”

The FCC found that Section 253(c) “should be understood as focused on protecting the interest of providers.” This finding contrasts with countless court decisions that hold Section 253(c) is intended to preserve the state and local interests in managing the public right of way; that is, as a counterweight to Section 253(a) that prohibits state or local government action otherwise inimical to the interests of telecommunications carriers.  Relying on its novel view of Section 253(c), the Commission concluded “while it might well be fair for providers to bear basic, reasonable costs of entry, the record does not reveal why it would be fair or reasonable from the standpoint of protecting providers to require them to bear costs beyond that level, particularly in the context of the deployment of Small Wireless Facilities.” (emphasis added)

Under the order, fees violate the Act unless: “(1) the fees are a reasonable approximation of the state or local government’s costs, (2) only objectively reasonable costs are factored into those fees, and (3) the fees are no higher than the fees charged to similarly-situated competitors in similar situations.”

The FCC provided further guidance, setting a presumptively lawful, nationwide fee schedule for small cell applications:  “(a) $500 for 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 $1,000 for non-recurring fees for a new pole (i.e., not a colocation) intended to support one or more Small Wireless Facilities; and (b) $270 per Small Wireless Facility per year for all recurring fees, including any possible ROW access fee or fee for attachment to municipally-owned structures in the ROW.”

State and Local Land-Use or Zoning Requirements – In addition to fees, the Commission noted there are other state and “local land-use or zoning requirements” that could restrict small cell deployments such that they “have the effect of prohibiting service in violation of Sections 253 and 332.” In its order, the Commission provides “guidance” on local zoning considerations typically assessed in wireless siting requests.

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) published in advance.

The Commission explained that aesthetic requirements that are “reasonably directed to avoiding or remedying the intangible public harm of unsightly or out-of-character deployments” are permissible.  However, if these aesthetic requirements are more burdensome than those applied to “similar infrastructure deployments” they are not permissible because the “discriminatory application evidences the requirements are not” reasonable or “directed at remedying any wireless infrastructure deployment.” Finally, to establish they are reasonably directed to aesthetic harms these requirements “must be published in advance.”

Minimum spacing requirements. – While some spacing requirements (i.e. mandating facilities be sited at some minimum distance apart from certain facilities or locations) “may violate Section 253(a), others may be reasonable aesthetic requirements.”  Therefore, the Commission determined that spacing requirements should be evaluated under the same standards as other aesthetic requirements.

Underground requirements – The Commission ruled that a “requirement that all wireless facilities be deployed underground would amount to an effective prohibition given the propagation characteristics of wireless signals.”  The FCC emphasized that although “undergrounding requirements may well be permissible under state law as a general matter, any local authority to impose undergrounding requirements under state law does not remove the imposition of such undergrounding requirements from the provisions of Section 253.”

Quid pro quo – “in-kind service” – The Commission  found “[a]nother type of restriction that imposes substantial burdens on providers, but does not meaningfully advance any recognized public-interest objective, is an explicit or implicit quid pro quo in which a municipality makes clear that it will approve a proposed deployment only on condition that the provider supply an “in-kind” service or benefit to the municipality, such as installing a communications network dedicated to the municipality’s exclusive use.” According to the FCC, “[s]uch requirements impose costs, but rarely, if ever, yield benefits directly related to the deployment. Additionally, where such restrictions are not cost-based, they inherently have ‘the effect of prohibiting’ service, and thus are preempted by Section 253(a).”

Shot Clocks For Expedited Review – The order seeks to speed approval of small cell wireless facility applications by establishing “shot clocks” applicable to state and local review, building upon the Commission’s 2009 Declaratory Ruling that established shot clocks for co-located (90-days) and new (150 days) macro-cell facilities.  Under the newly established rules applicable to small cells, there is a 60-day shot clock for collocation on preexisting structures, and a 90-day shot clock for new sites. The Commission clarified that for purposes of these Section 332 shot clocks, “attachment of facilities to existing structures constitutes collocation, regardless of whether the structure or the location had previously been zoned for wireless facilities.”

The FCC believes that the adoption of the shot clocks balances the authority states and localities have over review of wireless siting applications with the requirement of Section 332(c)(7)(B)(ii) to exercise this authority “within a reasonable period of time” taking into account the nature and scope of the request.

Shot Clocks and Batch Filings – The Commission also determined that when applications to deploy small cell facilities are filed in batches, “the shot clock that applies to the batch is the same one that would apply had the applicant submitted individual applications.”  In cases where an applicant files a single batch application including “both collocated and new construction of small wireless facilities, the longer 90-day shot clock will apply.” In an “extraordinary” case, a siting authority “can rebut the presumption of reasonableness of the shot clock period where a batch application causes legitimate overload on the siting authority’s resources.”

Violation of the Shot Clocks – State or local inaction by the end of the applicable shot clock will function as a “failure to act” under Section 332(c)(7)(B)(v) thereby allowing a carrier to file a court action. Such failure to act will also be considered a “presumptive prohibition” of the provision of personal wireless services in violation of Section 332(c)(7)(B)(i)(II). In such cases, the FCC “expects the state or local government to issue all necessary permits without further delay.” In cases where permits are not issued, the FCC believes “the applicant would have a straightforward case for obtaining expedited relief in court.”

If a case does go to court, the FCC acknowledges the siting authority “will have an opportunity to rebut the presumption of effective prohibition by demonstrating that the failure to act was reasonable under the circumstances and, therefore, did not materially limit or inhibit the applicant from introducing new services or improving existing services.”

In fashioning this regulatory framework, the Commission declined to adopt the “deemed granted” approach strongly advocated by the wireless industry for applications not ruled on within the shot clock period.

Starting of Shot Clock and Incomplete Applications –The Commission ruled that“a shot clock begins to run when an application is first submitted, not when the application is deemed complete.” For small cell applications, “the siting authority has 10 days from the submission of the application to determine whether the application is incomplete.”  Once an applicant submits the supplemental information requested by the siting authority the shot clock then resets – effectively giving the siting authority an additional 60 days for review.  For subsequent findings of incompleteness, “the shot clock would toll if the siting authority provides written notice within 10 days that the supplemental submission did not provide the information identified in the original notice delineating missing information.”

Voluntary Tolling of Shot Clock –The order allows the parties to mutually agree to toll the running of a shot clock period, allowing disagreements to be resolved in a collaborative setting if possible.

Shot Clock – Broad Application – In another major victory for the wireless industry the Commission adopted a broad interpretation of 332(c)(7)(B)(ii) requirements that will be applicable to the shot clocks. Under the Commission’s reasoning, “deployment will be kept on track by ensuring that the entire approval process necessary for deployment is completed within a reasonable period of time, as defined by the shot clocks.”

Turning aside arguments by local jurisdictions that this section of the Act – and any associated  shot clocks – should apply only to zoning requirements, the Commission agreed with the wireless industry and found the shot clocks should apply to “all authorizations a locality may require, and to all aspects of and steps in the siting process, including license or franchise agreements to access ROW, building permits, public notices and meetings, lease negotiations, electric permits, road closure permits, aesthetic approvals, and other authorizations needed for deployment.”

Existing Agreements – One key question left unanswered by the Commission’s order relates to existing small cell agreements between localities and wireless carries. As Commissioner Rosenworcel noted following adoption of the order, this decision “interferes with existing agreements and ongoing deployment across the country.”  She emphasizes there are “thousands of cities and towns” with agreements for infrastructure deployment – including 5G wireless facilities – and “many of them could be torn apart” as a result of the Commission’s order.

The next move is up to state and local jurisdictions around the nation. If substantial litigation follows as a result of this order, the “race” to 5G may be slowed to a “crawl” in many parts of the country. Perhaps, the Commission will soon learn that a true consensus-based regulatory scheme that accommodates the interests of not just the wireless carriers but also those of state and local governments – and the citizens they represent – is the best approach to winning the 5G war with China.