Louisiana Public Service Commission v. Federal Communications Commission

Background

Twenty-six private telephone companies and the United States defended FCC orders that changed how phone companies calculate depreciation. Twenty-three State public service commissions challenged that position, arguing the Communications Act left intrastate rate and accounting control to the States. The dispute arose after FCC orders in 1980–1981 adopted new depreciation methods (equal-life grouping, remaining-life accounting, and expensing inside wiring); the FCC first said it did not preempt states, then reversed and claimed its depreciation rules could override inconsistent state ratemaking.

Reasoning

The key question was who decides depreciation methods used to set intrastate phone rates. The Court reviewed the Act and focused on §152(b), which limits the FCC’s reach over intrastate “charges, classifications, [and] practices.” The Court concluded that §152(b) bars the FCC from dictating depreciation practices for intrastate ratemaking and that §220 did not clearly give the FCC power to preempt state regulation. The Court emphasized the separations process Congress created to allocate costs between interstate and intrastate service. The result: the Court reversed the Fourth Circuit and rejected the FCC’s claimed preemptive authority.

Real world impact

States retain authority to set depreciation methods for intrastate rates, so the FCC cannot unilaterally impose uniform depreciation accounting for intrastate service. Telephone companies and regulators must work through established separations and state ratemaking procedures, and the cases return for further proceedings consistent with this opinion.

Dissents or concurrances

The Chief Justice and Justice Blackmun dissented; two Justices did not participate.