The Communications Act of 1934 (Act) grants to the Federal
Communications Commission (FCC) broad authority to develop and
regulate "interstate and foreign commerce in wire and radio
communication," 47 U.S.C. § 151, but also provides that "nothing in
this chapter shall be construed to apply or to give the Commission
jurisdiction with respect to (1) charges, classifications,
practices, services, facilities, or regulations for or in
connection with intrastate communication service," § 152(b). In
1980 and 1981, the FCC issued orders changing its prior rules
concerning practices for depreciating telephone plant and
equipment. Subsequently, upon the petition of private telephone
companies, the FCC ruled that § 220 of the Act, which expressly
directs the FCC to prescribe depreciation practices, operated to
preempt inconsistent state depreciation regulations for intrastate
ratemaking purposes, and that, as an alternative ground, federal
displacement of state regulation was justified as being necessary
to avoid frustration of validly adopted federal policies. The Court
of Appeals affirmed.
Held: Section 152(b) bars federal preemption of state
regulation over depreciation of dual jurisdiction property for
intrastate ratemaking purposes. Pp.
476 U. S.
368-379.
(a) Sections 151 and 152(b) are naturally reconciled to define a
national goal of the creation of a rapid and efficient telephone
service, and to enact a dual regulatory system to achieve that
goal. P.
476 U. S.
370.
(b) Neither the legislative history of § 152(b) nor the Act's
structure supports the view that the words "charges,"
"classifications," and "practices," as used in § 152(b), were
intended to refer only to "customer charges" for specific services,
and not to depreciation charges. Those words are terms of art that
are to be interpreted by reference to the
Page 476 U. S. 356
trade to which they apply, and thus they embrace depreciation.
Pp.
476 U. S.
371-373.
(c) There is no merit to the argument that § 152(b) does not
control, because the plant involved is used interchangeably to
provide both interstate and intrastate service, and that § 152(b)'s
reservation of authority to state commissions should be confined to
intrastate matters that do not substantially affect interstate
communication. Although state regulation will generally be
displaced to the extent that it stands as an obstacle to the
accomplishment of the full purposes and objectives of Congress, a
federal agency may preempt state law only when and if it is acting
within the scope of its congressionally delegated authority. Here,
§ 152(b) constitutes a congressional
denial of power to
the FCC to require state commissions to follow FCC depreciation
practices for intrastate ratemaking purposes, and the FCC may not
take "preemptive" action merely because it thinks such action will
best effectuate federal policy. Moreover, the Act itself
establishes a process designed to resolve "jurisdictional
separations" matters, by which process it may be determined what
portion of an asset is employed to produce or deliver interstate,
as opposed to intrastate, service, 47 U.S.C. § 410(c). Thus it is
possible to apply different rates and methods of depreciation to
plant once the correct allocation between interstate and intrastate
use has been made. Pp.
476 U. S.
373-376.
(d) Nor is there merit to the argument that § 220, which directs
the FCC to prescribe the classes of property for which depreciation
charges may be included under operating expenses in fixing rates,
and which prohibits carriers from departing from FCC-set
regulations respecting depreciation, requires automatic preemption
of all state regulation respecting depreciation. The meaning of §
220 is not so unambiguous or straightforward as to override §
152(b)'s command that "
nothing in this chapter shall be
construed to apply or to give the Commission jurisdiction" over
intrastate service. Pp.
476 U. S.
376-378.
737 F.2d 388, reversed and remanded.
BRENNAN, J., delivered the opinion of the Court, in which WHITE,
MARSHALL, REHNQUIST, and STEVENS, JJ., joined. BURGER, C.J., and
BLACKMUN, J., dissented. POWELL and O'CONNOR, JJ., took no part in
the consideration or decision of the cases.
Page 476 U. S. 358
JUSTICE BRENNAN delivered the opinion of the Court.
In these consolidated cases, we are asked by 26 private
telephone companies and the United States to sustain the holding of
the Court of Appeals for the Fourth Circuit that orders of the
Federal Communications Commission (FCC or Commission) respecting
the depreciation of telephone plant and equipment preempt
inconsistent state regulation. They are opposed by the Public
Service Commissions of 23 States, backed by 30
amici
curiae, who argue that the Communications Act of 1934 (Act),
48 Stat. 1064, as amended, 47 U.S.C. § 161
et seq.,
expressly denied the FCC authority to establish depreciation
practices and charges insofar as they relate to the setting of
rates for intrastate telephone service.
Respondents suggest that the heart of the cases is whether the
revolution in telecommunications occasioned by the federal policy
of increasing competition in the industry will be thwarted by state
regulators who have yet to recognize or
Page 476 U. S. 359
accept this national policy, and who thus refuse to permit
telephone companies to employ accurate accounting methods designed
to reflect, in part, the effects of competition. We are told that,
already, there may be as much as $26 billion worth of "reserve
deficiencies" on the books of the Nation's local telephone
companies, a reserve which, it is insisted, represents inadequate
depreciation of a magnitude that threatens the financial ability of
the industry to achieve the technological progress and provide the
quality of service that the Act was passed to promote. Petitioners
answer that the Act clearly establishes a system of dual state and
federal authority over telephone service. They contend that the Act
vests in the States exclusive power over intrastate ratemaking,
which power, petitioners argue, includes final authority over how
depreciation shall be calculated for the purpose of setting those
intrastate rates. Petitioners note also that the Due Process Clause
of the Fourteenth Amendment necessarily represents a check on the
power of the States to set depreciation rates at what would amount
to confiscatory levels, and that respondents therefore overstate
the danger of the States crippling the financial vitality of phone
companies.
In deciding these cases, it goes without saying that we do not
assess the wisdom of the asserted federal policy of encouraging
competition within the telecommunications industry. Nor do we
consider whether the FCC should have the authority to enforce, as
it sees fit, practices which it believes would best effectuate this
purpose. Important as these issues may be, our task is simply to
determine where Congress has placed the responsibility for
prescribing depreciation methods to be used by state commissions in
setting rates for intrastate telephone service. In our view, the
language, structure, and legislative history of the Act best
support petitioners' position that the Act denies the FCC the power
to dictate to the States as it has in these cases, and accordingly,
we reverse.
Page 476 U. S. 360
I
The Act establishes, among other things, a system of dual state
and federal regulation over telephone service, and it is the nature
of that division of authority that these cases are about. In broad
terms, the Act grants to the FCC the authority to regulate
"interstate and foreign commerce in wire and radio communication,"
47 U.S.C. § 151, while expressly denying that agency "jurisdiction
with respect to . . . intrastate communication service. . . ." 47
U.S.C. § 152(b). However, while the Act would seem to divide the
world of domestic telephone service neatly into two hemispheres --
one comprised of interstate service, over which the FCC would have
plenary authority, and the other made up of intrastate service,
over which the States would retain exclusive jurisdiction -- in
practice, the realities of technology and economics belie such a
clean parceling of responsibility. This is so because virtually all
telephone plant that is used to provide intrastate service is also
used to provide interstate service, and is thus conceivably within
the jurisdiction of both state and federal authorities. Moreover,
because the same carriers provide both interstate and intrastate
service, actions taken by federal and state regulators within their
respective domains necessarily affect the general financial health
of those carriers, and hence their ability to provide service, in
the other "hemisphere. "
In 1980 and 1981, the FCC issued two orders that ultimately
sparked this litigation. In the 1980 order, the FCC changed two
depreciation practices affecting telephone plant. Property
Depreciation, 83 F.C.C.2d 267,
reconsideration denied, 87
F.C.C.2d 916 (1981). First, the order altered how carriers could
group property subject to depreciation. Because carriers employ so
many individual items of equipment in providing service, it would
be impossible to depreciate each item individually, and property is
therefore classified and depreciated in groups. The order permitted
companies the option of grouping plant for depreciation
purposes
Page 476 U. S. 361
based on its estimated service life (the "equal life" approach).
This replaced the FCC's prior practice of requiring companies to
classify and depreciate property according to its year of
installation (the "vintage year" method). This change was made to
allow depreciation to be based on smaller and more homogeneous
groupings, which, the FCC concluded, would result in more accurate
matching of capital recovery with capital consumption.
The 1980 order further sought to promote improved accounting
accuracy by replacing "whole life" depreciation with the "remaining
life" method. Under remaining life, and unlike the treatment under
a whole life regime, if estimates upon which depreciation schedules
are premised prove erroneous, they may be corrected in mid-course
in a way that assures that the full cost of the asset will
ultimately be recovered.
The third FCC-mandated change in plant depreciation was
announced in a 1981 order, and involved the cost of labor and
material associated with the installation of wire inside the
premises of a business or residence. The new rule provided that
this so-called "inside wiring" no longer be treated as a capital
investment to be depreciated over time, but rather as a cost to be
"expensed" in the year incurred.
Uniform System of
Accounts, 85 F.C.C.2d 818.
Later in 1981, the National Association of Regulatory Utility
Commissioners (NARUC) petitioned the FCC for a "clarification" of
its order respecting inside wiring. Specifically, NARUC sought a
declaration that the FCC's order did not restrict the discretion of
state commissions to follow different depreciation practices in
computing revenue requirements and rates for intrastate
services.
On April 27, 1982, the FCC issued a memorandum opinion and order
in which it agreed with NARUC that its order respecting the
depreciation of inside wiring did not preclude state regulators
"from using their own accounting and depreciation procedures for
intrastate ratemaking purpose[s]
Page 476 U. S. 362
. . . ."
Uniform System of Accounts, 89 F.C.C.2d 1094,
1095. In reaching this conclusion, the FCC declared that it had not
intended the 1981 order to "have any preemptive effect that does
not arise by operation of law," and added that
"[n]o policy of this Commission would be furthered by requiring
state commissions to adhere to the rules we have adopted for the
purposes of computing the interstate revenue requirement."
Id. at 1097. The FCC then examined the language and
legislative history of sections of the Act dealing with
jurisdiction and depreciation, and found that they did not support
the position that unwilling state commissions either were required
by operation of law, or could be required in the discretion of the
FCC, to follow all accounting and depreciation methods prescribed
by the Commission. Two commissioners issued a written dissent in
which they argued that the FCC had, in its 1981 order, intended to
preempt inconsistent state depreciation practices, and that
deference to the States was especially inappropriate where an
important federal policy -- that of nurturing a "brave new world"
of competition in the industry -- was at stake.
Respondents petitioned for reconsideration of the order, and the
FCC reversed itself and held that § 220 of the Act, which deals
expressly with depreciation, does operate automatically to preempt
inconsistent state action where the Commission has acted to
prescribe depreciation rates for a carrier. Amendment of Part 51,
92 F.C.C.2d 864 (1983). As an alternative ground in support of
preemption, the FCC asserted that federal displacement of state
regulation is justifiable under the Act when necessary "to avoid
frustration of validly adopted federal policies."
Id. at
875. Applying this standard to the facts before it, the FCC then
found preemption appropriate. It noted that
"adequate capital recovery is important to"
"make available, so far as possible, to all the people of the
United States a rapid, efficient, Nationwide, world-wide wire and
radio communication service with "
Page 476 U. S. 363
"adequate facilities at reasonable charges. . . ."
"47 U.S.C. 151,"
and that
"[s]tate depreciation rate prescriptions that do not adequately
provide for capital recovery in the competitive environment, which
constitutes this Commission's policy in those markets found capable
of supporting competition, would frustrate the accomplishment of
that policy and are preemptable by this Commission."
92 F.C.C.2d at 876.
The Fourth Circuit affirmed.
Virginia State Corporation
Comm'n v. FCC, 737 F.2d 388 (1984). [
Footnote 1] It acknowledged that the Act "does reserve
to the states the authority to prescribe rates for intrastate
telephone service," but determined that
"reservation [of authority] is not to be read as preserving the
states' sphere of intrastate jurisdiction at the expense of an
efficient, viable interstate telecommunications network."
Id. at 392. The court then noted that the FCC had
intended to preempt state practices, held that the authority to do
so was statutorily entrusted to the FCC, and found that the
regulations at issue were reasonably designed to ensure that
federal objectives would not be frustrated. The Court of Appeals
did not reach the Commission's holding that § 220 of the Act
automatically operates to preempt state-prescribed depreciation at
odds with depreciation ordered by the FCC. We granted certiorari to
review the decision of the Court of Appeals. 472 U.S. 1025 (1985).
[
Footnote 2]
Page 476 U. S. 364
II
Both petitioners and respondents characterize this litigation as
one in which two different persons seek to drive one car, a
condition the parties agree is unsatisfactory. [
Footnote 3] Where the parties disagree is with
respect to who ought to be displaced from the controls. In order to
address the contentions, it is appropriate to consider not only the
structure of the Act and how it divides authority, but also the
nature and function of depreciation as a component of utility
regulation.
Depreciation is defined as the loss in service value of a
capital asset over time. In the context of public utility
accounting and regulation, it is a process of charging the cost of
depreciable property, adjusted for net salvage, to operating
expense accounts over the useful life of the asset. Thus,
accounting practices significantly affect, among other things, the
rates that customers pay for service. This is so because a
regulated carrier is entitled to recover its reasonable expenses
and a fair return on its investment through the rates
Page 476 U. S. 365
it charges its customers, and because depreciation practices
contribute importantly to the calculation of both the carrier's
investment and its expenses.
See Knoxville v. Knoxville Water
Co., 212 U. S. 1,
212 U. S. 13-14
(1909).
See generally 1 A. Priest, Principles of Public
Utility Regulation (1969); P. Garfield & W. Lovejoy, Public
Utility Economics (1964); 1 A. Kahn, Economics of Regulation
(1970).
The total amount that a carrier is entitled to charge for
services, its "revenue requirement," is the sum of its current
operating expenses, including taxes and depreciation expenses, and
a return on its investment "ratebase." The original cost of a given
item of equipment enters the ratebase when that item enters
service. As it depreciates over time -- as a function of wear and
tear or technological obsolescence -- the ratebase is reduced
according to a depreciation schedule that is based on an estimate
of the item's expected useful life. Each year, the amount that is
removed from the ratebase is included as an operating expense. In
the telephone industry, which is extremely capital-intensive,
depreciation charges constitute a significant portion of the annual
revenue requirement recovered in rates; the parties agree that
depreciation charges amount to somewhere between 10% to 15% of the
intrastate revenue requirement.
In essence, petitioners' argument is that the plain and
unambiguous language of § 152(b) denies the FCC power to compel the
States to employ FCC-set depreciation practices and schedules in
connection with the setting of intrastate rates. In part, that
section provides:
"[N]othing in this chapter shall be construed to apply or to
give the Commission jurisdiction with respect to (1) charges,
classifications, practices, services, facilities, or regulations
for or in connection with intrastate communication service by wire
or radio of any carrier. . . ."
Petitioners maintain that "charges," "classifications," and
"practices" are "terms of art" which denote depreciation and
accounting, and thus that the question presented by these
Page 476 U. S. 366
cases is expressly answered by the statute. They argue also that
the legislative history shows on a more general level that § 152(b)
was intended to reserve to the States exclusive regulatory
jurisdiction over intrastate service, especially intrastate
ratemaking, and that, given the importance of depreciation to
ratemaking, to require state regulators to follow FCC depreciation
practices would frustrate the statutory design of preserving the
States' ratemaking authority over intrastate service. Petitioners
maintain that to confer this power on the FCC would be, in effect,
to write the jurisdictional limitation of § 152(b) out of the
Act.
Where petitioners focus on § 152(b), respondents' principal
argument is that this litigation turns on § 220 of the Act, which
they insist constitutes an unambiguous grant of power to the FCC
exclusively to regulate depreciation. Their argument is that, once
the FCC has acted pursuant to that section, States are
automatically precluded from prescribing different depreciation
practices or rates. Section 220(b) states:
"The Commission shall, as soon as practicable, prescribe for
such carriers the classes of property for which depreciation
charges may be properly included under operating expenses, and the
percentages of depreciation which shall be charged with respect to
each of such classes of property, classifying the carriers as it
may deem proper for this purpose. The Commission may, when it deems
necessary, modify the classes and percentages so prescribed. Such
carriers shall not, after the Commission has prescribed the
[classes] of property for which depreciation charges may be
included, charge to operating expenses any depreciation charges on
classes of property other than those prescribed by the Commission,
or after the Commission has prescribed percentages of depreciation,
charge with respect to any class of property a percentage of
depreciation other than that prescribed therefor by the Commission.
No such carrier shall in any case include in any form under its
Page 476 U. S. 367
operating or other expenses any depreciation or other charge or
expenditure included elsewhere as a depreciation charge or
otherwise under its operating or other expenses."
Respondents assert that their understanding of § 220(b) is
bolstered by other substantive provisions of § 220. They note, for
example, that, under § 220(g), once the FCC has prescribed the
"forms and manner of keeping accounts," it is
"unlawful . . . to keep any other accounts . . . than those so
prescribed . . . or to keep the accounts in any other manner than
that prescribed or approved by the Commission,"
and that subsections (d) and (e) of § 220 provide for civil and
criminal penalties for failing to keep accounts as determined by
the Commission. Moreover, § 220(h) permits the FCC in its
discretion, if it finds such action to be "consistent with the
public interest," to "except the carriers of any particular class
or classes in any State from any of the requirements" under the
section "in cases where such carriers are subject to State
commission regulation with respect to matters to which this section
relates." Respondents argue that this provision strongly suggests
that, unless the FCC affirmatively acts to waive or delegate its
authority,
i.e., to "except" carriers from its regulation,
then, under § 220(h), the States impliedly cannot adopt
inconsistent regulations. Respondents also assert that § 220(i)
makes clear that the role of the States in depreciation is
essentially advisory only. That section provides that the FCC,
before exercising its authority, "shall notify" the state
commissions and provide an opportunity to the States to "present
[their] views" and also instructs the FCC to "consider such views
and recommendations." According to respondents,
"Congress gave the states an opportunity to present their views
because it expected them to be bound by the resulting
prescriptions."
Joint Brief for Listed Private Respondents 14 (Joint Brief). In
sum, the position of respondents is that
"Congress clearly intended that there be one regime -- rather
than multiple regimes -- of depreciation
Page 476 U. S. 368
for each subject carrier. The FCC was given responsibility for
establishing such a regime, and its depreciation decisions have to
be respected unless and until it relinquishes authority to the
states in individual instances. The states' interest is recognized,
but their role is confined to providing their 'views and
recommendations.'"
Ibid.
Although respondents rely primarily on § 220 to support
preemption, they also urge, as an alternative and independent
ground, the reasoning relied on by the Court of Appeals, namely,
that the FCC is entitled to preempt inconsistent state regulation
which frustrates federal policy. It is in the context of this
argument that respondents most forcefully contend that state
regulators must not be permitted to jeopardize the continued
viability of the telecommunications industry by refusing to permit
carriers to depreciate plant in a way that allows for accurate and
timely recapturing of capital. This argument, which is pressed
especially by the Solicitor General, relies largely on § 151,
which, in broad terms, directs the FCC to develop a rapid and
efficient national telephone network.
III
The Supremacy Clause of Art. VI of the Constitution provides
Congress with the power to preempt state law. Preemption occurs
when Congress, in enacting a federal statute, expresses a clear
intent to preempt state law,
Jones v. Rath Packing Co.,
430 U. S. 519
(1977), when there is outright or actual conflict between federal
and state law,
e.g., Free v. Bland, 369 U.
S. 663 (1962), where compliance with both federal and
state law is in effect physically impossible,
Florida Lime
& Avocado Growers, Inc. v. Paul, 373 U.
S. 132 (1963), where there is implicit in federal law a
barrier to state regulation,
Shaw v. Delta Air Lines,
Inc., 463 U. S. 85
(1983), where Congress has legislated comprehensively, thus
occupying an entire field of regulation and leaving no room for the
States to supplement federal law,
Rice v. Santa Fe Elevator
Corp., 331 U. S. 218
(1947), or where the state law stands as
Page 476 U. S. 369
an obstacle to the accomplishment and execution of the full
objectives of Congress.
Hines v. Davidowitz, 312 U. S.
52 (1941). Preemption may result not only from action
taken by Congress itself; a federal agency acting within the scope
of its congressionally delegated authority may preempt state
regulation.
Fidelity Federal Savings & Loan Assn. v. De la
Cuesta, 458 U. S. 141
(1982);
Capital Cities Cable, Inc. v. Crisp, 467 U.
S. 691 (1984).
In the present cases, two of these "varieties" of preemption are
alleged. As noted above, respondents argue that § 220, by its
terms, confers exclusive regulatory power over depreciation on the
FCC, thus raising a claim that Congress has expressly manifested a
clear intent to displace state law. In addition, respondents
maintain that the refusal of the States to accept the FCC-set
depreciation schedules and rules will frustrate the federal policy
of increasing competition in the industry, and thus that state
regulation "stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress." In our
view, the jurisdictional limitations placed on the FCC by § 152(b),
coupled with the fact that the Act provides for a "separations"
proceeding to determine the portions of a single asset that are
used for interstate and intrastate service, 47 U.S.C. § 410(c),
answer both preemption theories.
The critical question in any preemption analysis is always
whether Congress intended that federal regulation supersede state
law.
Rice v. Santa Fe Elevator Corp., supra. The Act
itself declares that its purpose is
"regulating interstate and foreign commerce in communication by
wire and radio so as to make available, so far as possible, to all
the people of the United States a rapid, efficient, Nationwide, and
worldwide wire and radio communication service with adequate
facilities at reasonable charges. . . ."
47 U.S.C. § 151. In order to accomplish this goal, Congress
created the FCC to centralize and consolidate the regulatory
responsibility that had previously been the province of the
Interstate Commerce Commission
Page 476 U. S. 370
and the Federal Radio Commission under predecessor statutes.
See generally McKenna, Pre-Emption Under the
Communications Act, 37 Fed.Comm.L.J. 1, 12-18 (1985). To this
degree, § 151 may be read as lending some support to respondents'
position that state regulation which frustrates the ability of the
FCC to perform its statutory function of ensuring efficient,
nationwide phone service may be impliedly barred by the Act.
We might be inclined to accept this broad reading of § 151 were
it not for the express jurisdictional limitations on FCC power
contained in § 152(b). Again, that section asserts that
"nothing in this chapter shall be construed to apply or to give
the Commission jurisdiction with respect to (1) charges,
classifications, practices, services, facilities, or regulations
for or in connection with intrastate communication service. . .
."
By its terms, this provision fences off from FCC reach or
regulation intrastate matters -- indeed, including matters "in
connection with" intrastate service. Moreover, the language with
which it does so is certainly as sweeping as the wording of the
provision declaring the purpose of the Act and the role of the
FCC.
In interpreting §§ 151 and 152(b), we are guided by the familiar
rule of construction that, where possible, provisions of a statute
should be read so as not to create a conflict.
Washington
Market Co. v. Hoffman, 101 U. S. 112
(1879). We agree with petitioners that the sections are naturally
reconciled to define a national goal of the creation of a rapid and
efficient phone service, and to enact a
dual regulatory
system to achieve that goal. Moreover, were we to find the sections
to be in conflict, we would be disinclined to favor the provision
declaring a general statutory purpose, as opposed to the provision
which defines the jurisdictional reach of the agency formed to
implement that purpose.
Respondents advance a number of arguments to counter the view
that § 152(b) forbids the FCC to prescribe depreciation
Page 476 U. S. 371
practices and charges in the context of ratemaking for
intrastate service. We address each in turn.
A
Respondents assert that the legislative history of § 152(b), as
well as the structure of the Act, shows that "charges" and
"classifications" refer only to "customer charges," not
depreciation charges, and thus that § 152(b) does not purport to
limit the FCC power to regulate depreciation. They seek to support
this narrow reading of § 152(b) by noting that the words "charges,"
"classifications," "practices," and "regulations" appear throughout
the Act in contexts where it is clear that what is meant is charges
which relate directly to carriers' rate and service relationships
with their customers, rather than depreciation or accounting
charges.
See §§ 201-205. Reading the sections
in pari
materia, we are told, makes it apparent that Congress was
concerned in § 152(b) with preserving state autonomy over the rates
charged by carriers for specific services, not over depreciation.
According to respondents, this reading is bolstered by the
legislative history of the section, which reveals that the
provision was proposed by state regulators in reaction to this
Court's decision in the so-called
Shreveport Rate Case,
Houston, E. & W. T. R. Co. v. United States, 234 U.
S. 342 (1914), which held, among other things, that the
Interstate Commerce Commission had the power to order an increase
in specific intrastate railroad rates charged to customers in order
to avoid discrimination against interstate commerce.
"In other words, Section 2(b)(1) was from the outset concerned
with protection against federal preemption of the states' setting
of individual customer charges for specific intrastate
services."
Joint Brief 34.
We reject this narrow reading of § 152(b). "Charges,"
"classifications," and "practices" are terms often used by
accountants, regulators, courts, and commentators to denote
depreciation treatment,
see, e.g., 280 U.
S. S. 372� Co v. West, 280 U.
S. 234,
280 U. S. 262
(1930);
Smith v. Illinois Bell Telephone Co., 282 U.
S. 133,
282 U. S. 158
(1930); Wheat, The Regulation of Interstate Telephone Rates, 51
Harv.L.Rev. 846, 859 (1938); A. Kahn, Economics of Regulation
(1970), and in accordance with the rule of construction that
technical terms of art should be interpreted by reference to the
trade or industry to which they apply,
Corning Glass Works v.
Brennan, 417 U. S. 188
(1974), we find that they do embrace depreciation. It is worth
noting that the FCC itself, in the very orders underlying this
litigation, used "charges" to mean "depreciation charges."
E.g., Property Depreciation, 83 F.C.C.2d at 275.
Nor does the
Shreveport Rate Case carry the load that
respondents ask of it. In that case, this Court interpreted the
constitutional and statutory authority of the Interstate Commerce
Commission to include the power to regulate, indeed, set,
intrastate rates in order to prevent discrimination against
interstate traffic. It is certainly true, as respondents assert,
that, when Congress was drafting the Communications Act, § 152(b)
was proposed and supported by the state commissions in reaction to
what they perceived to be the evil of excessive federal regulation
of intrastate service such as was sanctioned by the
Shreveport
Rate Case; but we find no authority in the legislative history
to support respondents' position that the sole concern of the state
commissioners was with "protection against federal preemption of
the states' setting of individual customer charges for specific
intrastate services." Joint Brief 34. Rather, the legislative
history reveals that representatives from the industry and the
States were fully aware that what was at stake in the Act were
broad powers to regulate, including, but not limited to, the
setting of individual rates, and that "[t]he question of an
appropriate division between federal and state regulatory power was
a dominating controversy in 1934." McKenna, 37 Fed.Comm.L.J. at 2.
In other words, while we agree that provisions in both the Senate
and House bills were designed
Page 476 U. S. 373
to overrule the
Shreveport Rate Case, we are not
persuaded that it was anyone's understanding that this "overruling"
could or should be accomplished by merely including in the Act one
section which forbade the FCC to establish specific rates for
certain intrastate services; had this been the intention, it would
hardly have been necessary to deny the FCC the jurisdiction over
"charges, classifications, practices, services, facilities, or
regulations for or in connection with intrastate communication
service. . . ." Presumably, it would have sufficed simply to deny
the FCC jurisdiction over "rates." In sum, given the breadth of the
language of § 152(b), and the fact that it contains not only a
substantive jurisdictional limitation on the FCC's power, but also
a rule of statutory construction ("[N]othing in this chapter shall
be construed to apply or to give the Commission jurisdiction with
respect to . . . intrastate communication service . . ."), we
decline to accept the narrow view urged by respondents, and hold
instead that it denies the FCC the power to preempt state
regulation of depreciation for intrastate ratemaking purposes.
B
Accordingly, we cannot accept respondents' argument that §
152(b) does not control because the plant involved in this case is
used interchangeably to provide both interstate and intrastate
service, and that, even if § 152(b) does reserve to the state
commissions some authority over "certain aspects" of intrastate
communication, it should be "confined to intrastate matters which
are
separable from and do not substantially affect' interstate
communication." Joint Brief 36. With respect to the present cases,
respondents insist that the refusal of the States to employ
accurate measures of depreciation will have a severe impact on the
interstate communications network because investment in plant will
be recovered too slowly or not at all, with the result that new
investment will be discouraged to the detriment of the entire
network. Numerous decisions of the Courts of Appeals are cited as
authority
Page 476 U. S.
374
for the proposition that § 152(b) applies as a
jurisdictional bar to FCC preemptive action only when two factors
are present; first, when the matter to be regulated is purely
local, and second, when interstate communication is not affected by
the state regulation which the FCC would seek to preempt. E.g.,
North Carolina Utilities Comm'n v. FCC, 537 F.2d 787 (CA4),
cert. denied, 429 U.S. 1027 (1976); North Carolina
Utilities Comm'n v. FCC, 552 F.2d 1036 (CA4), cert.
denied, 434 U.S. 874 (1977); Puerto Rico Telephone Co. v.
FCC, 553 F.2d 694 (CA1 1977); New York Telephone Co. v.
FCC, 631 F.2d 1059 (CA2 1980).
The short answer to this argument is that it misrepresents the
statutory scheme and the basis and test for preemption. While it is
certainly true, and a basic underpinning of our federal system,
that state regulation will be displaced to the extent that it
stands as an obstacle to the accomplishment and execution of the
full purposes and objectives of Congress,
Hines, 312 U.S.
at
312 U. S. 67, it
is also true that a federal agency may preempt state law only when
and if it is acting within the scope of its congressionally
delegated authority. This is rue for at least two reasons. First,
an agency literally has no power to act, let alone preempt the
validly enacted legislation of a sovereign State, unless and until
Congress confers power upon it. Second, the best way of determining
whether Congress intended the regulations of an administrative
agency to displace state law is to examine the nature and scope of
the authority granted by Congress to the agency. Section 152(b)
constitutes, as we have explained above, a congressional
denial of power to the FCC to require state commissions to
follow FCC depreciation practices for intrastate ratemaking
purposes. Thus, we simply cannot accept an argument that the FCC
may nevertheless take action which it thinks will best effectuate a
federal policy. An agency may not confer power upon itself. To
permit an agency to expand its power in the face of a congressional
limitation on its jurisdiction would be to grant to the agency
Page 476 U. S. 375
power to override Congress. This we are both unwilling and
unable to do.
Moreover, we reject the intimation -- the position is not
strongly pressed -- that the FCC cannot help but preempt state
depreciation regulation of joint plant if it is to fulfill its
statutory obligation and determine depreciation for plant used to
provide interstate service,
i.e., that it makes no sense
within the context of the Act to depreciate one piece of property
two ways. The Communications Act not only establishes dual state
and federal regulation of telephone service; it also recognizes
that jurisdictional tensions may arise as a result of the fact that
interstate and intrastate service are provided by a single
integrated system. Thus, the Act itself establishes a process
designed to resolve what is known as "jurisdictional separations"
matters, by which process it may be determined what portion of an
asset is employed to produce or deliver interstate, as opposed to
intrastate, service. 47 U.S.C. §§ 221(c), 410(c). Because the
separations process literally separates costs such as taxes and
operating expenses between interstate and intrastate service, it
facilitates the creation or recognition of distinct spheres of
regulation.
See Smith v. Illinois Bell Telephone Co.,
282 U. S. 133
(1930). As respondents concede, and as the Court of Appeals itself
acknowledged, 737 F.2d at 396, it is certainly possible to apply
different rates and methods of depreciation to plant once the
correct allocation between interstate and intrastate use has been
made, [
Footnote 4] Brief for
Respondent
Page 476 U. S. 376
GTE 36, just as it is possible to determine that, for example,
75% of an employee's time is devoted to the production of
intrastate service, and only one-quarter to interstate service, and
to allocate the cost of that employee accordingly. Respondents
maintain that, if the FCC and the States apply different
depreciation practices to the same property, then the "whole
purpose of depreciation, which is to match depreciation charges of
the equipment with the revenues generated by its use," will be
frustrated.
Ibid. But this is true and a concern only to
the degree that the principles, judgments, and considerations that
underlie depreciation rules reflect only "real world" facts, rather
than choices made by regulators partially on the basis of fact and
partially on the basis of such factors as the perceived need to
improve the industry's cash flow, spur investment, subsidize one
class of customer, or any other policy factor. What is really
troubling respondents, of course, is their sense that state
regulators will not allow them sufficient revenues. While we do not
deprecate this concern, § 152(b) precludes both the FCC and this
Court from providing the relief sought. As we so often admonish,
only Congress can rewrite this statute.
C
We also reject respondents' argument that § 220, which deals
specifically [
Footnote 5] and
expressly with depreciation, requires
Page 476 U. S. 377
automatic preemption of all state regulation respecting
depreciation. As noted above, § 220 directs the FCC to prescribe
the classes of property for which depreciation charges may be
included under operating expenses, and prohibits carriers from
departing from FCC-set regulations respecting depreciation. While
it is, no doubt, possible to find some support in the broad
language of the section for respondents' position, we do not find
the meaning of the section so unambiguous or straightforward as to
override the command of § 152(b) that "
nothing in this
chapter shall be construed to apply or to give the Commission
jurisdiction" over intrastate service. We note, for example, that a
very strict reading of § 220 -- which is what respondents urge and
upon which they ultimately rely -- is simply untenable. There can
be no dispute, for example, regarding the fact that taxing
authorities of the Federal Government are entitled to require the
carriers to employ, for tax purposes, depreciation practices and
schedules different from those which might be ordered by the FCC
for interstate ratemaking purposes. We are advised by petitioners
that carriers do, as a routine matter, keep "separate" books in
this connection. Were respondents' reading of § 220 correct, this
practice would violate the Act, and taxing authorities would be
compelled to compute taxation on the basis of depreciation
schedules employed by the FCC for ratemaking purposes. Moreover,
despite the sweeping language of § 220, nowhere does it even allude
to, let alone expressly refer to, depreciation as a component of
state ratemaking. Nor is the word "preemption" used.
It is thus at least possible, as some petitioners argue, that
the section was intended to do no more than spell out the authority
of the FCC over depreciation in the context of interstate
regulation. It is similarly plausible, as other
Page 476 U. S. 378
petitioners contend, that the section, which is captioned
"Accounts, records, and memoranda," was addressed to the plenary
authority of the FCC to dictate how the carriers' books would be
kept for the purposes of financial reporting, in order to ensure
that investors and regulators would be presented with an accurate
picture of the financial health of the carriers. In any event, we
need not, in order to decide these cases, define fully the scope of
the section, and we hold only that § 220 does not operate to
preempt state depreciation regulation for intrastate ratemaking
purposes. [
Footnote 6]
Page 476 U. S. 379
Like many statutes, the Act contains some internal
inconsistencies, vague language, and areas of uncertainty. It is
not a perfect puzzle into which all the pieces fit. Thus, it is
with the recognition that there are not crisp answers to all of the
contentions of either party that we conclude that § 152(b)
represents a bar to federal preemption of state regulation over
depreciation of dual jurisdiction property for intrastate
ratemaking purposes.
For the reasons stated above, the judgment of the Court of
Appeals for the Fourth Circuit is reversed, and the cases are
remanded for further proceedings consistent with this opinion.
It is so ordered.
THE CHIEF JUSTICE and JUSTICE BLACKMUN dissent.
JUSTICE POWELL and JUSTICE O'CONNOR took no part in the
consideration or decision of these cases.
* Together with No. 84-889,
California et al. v. Federal
Communications Commission et al., No. 84-1054,
Public
Utilities Commission of Ohio et al. v. Federal Communications
Commission et al.; and No. 84-1069,
Florida Public Service
Commission v. Federal Communications Commission et al., on
certiorari to the same court.
[
Footnote 1]
Exclusive jurisdiction over final FCC orders lies with the
courts of appeals. 28 U.S.C. § 2342(1).
[
Footnote 2]
We originally postponed jurisdiction in No. 84-871, which came
to us by way of appeal, rather than certiorari. A potential
jurisdictional issue in that case arose as a result of the
contention of the Government and the telephone companies that an
appeal did not lie under 28 U.S.C. § 1264(2), because the decision
of the Court of Appeals did not expressly strike down any
particular state ratemaking order.
We need not address or resolve whether an appeal is proper in
No. 84-871. The Louisiana Public Service Commission has asked that
its jurisdictional statement be treated as a petition for a writ of
certiorari, and we clearly have certiorari jurisdiction under 28
U.S.C. § 1264(1) to decide the case. We have, moreover, granted the
petitions for certiorari in Nos. 84-889, 84-1064, and 84-1069, 472
U.S. 1025 (1985). In accordance with our customary practice,
see, e.g., Renton v. Playtime Theatres, Inc., 475 U. S.
41,
475 U. S. 43-44,
n. 1 (1986), we dismiss the appeal in No. 84-871 and, treating the
papers as a petition for certiorari, grant the writ of
certiorari.
[
Footnote 3]
Petitioners suggest that overreaching by the FCC has resulted in
a situation where one person has a foot on the accelerator of a car
while another person is attempting to steer. Tr. of Oral Arg. 9,
21. Although it is not evident from the metaphor whether
petitioners' position is that the hand or the foot belongs to the
FCC -- whether, in other words, the FCC has stepped on the States'
authority or heavy-handedly grabbed the wheel -- the notion is that
it is the States' responsibility under the Act to value property
and to ascertain a ratebase, and that it is inconsistent to confer
depreciation authority -- which is, according to the States,
integrally bound up with valuation considerations and the
determination of the ratebase -- on the FCC.
Respondents assert that this is "the case of two hands on the
steering wheel,"
id. at 40, by which, presumably, they
mean to suggest that the hands belong to two different entities.
Their position is that it makes no sense to have both the FCC and
the state regulators depreciating the same piece of plant in two
different ways.
[
Footnote 4]
Thus, these cases are readily distinguishable from those in
which FCC preemption of state regulation was upheld where it was
not possible to separate the interstate and the intrastate
components of the asserted FCC regulation.
See, e.g., North
Carolina Utilities Comm'n v. FCC, 637 F.2d 787 (CA4),
cert. denied, 429 U.S. 1027 (1976), and
North Carolina
Utilities Comm'n v. FCC, 552 F.2d 1036 (CA4),
cert.
denied, 434 U.S. 874 (1977) (Where FCC acted within its
authority to permit subscribers to provide their own telephones,
preemption of inconsistent state regulation prohibiting subscribers
from connecting their own phones unless used exclusively in
interstate service upheld, since state regulation would negate the
federal tariff).
[
Footnote 5]
Respondents maintain that, since "[s]pecific terms prevail over
the general,"
Fourco Glass Co. v. Transmirra Products
Corp., 353 U. S. 222,
353 U. S. 228
(1957), and § 220 deals specifically with depreciation, the general
language of § 152(b) should not be read to bar FCC regulation of
depreciation. The rule of construction cited by respondents is
simply inapplicable in the context of these cases. First, § 152(b)
deals with jurisdiction, and thus addresses a different subject
than § 220, which respondents correctly characterize as involving
depreciation. Thus, while § 152(b) may be more "general" than §
220, the sections are not general or specific with respect to each
other. Second, § 152(b) not only imposes jurisdictional limits on
the power of a federal agency, but also, by stating that nothing in
the Act shall be construed to extend FCC jurisdiction to intrastate
service, provides its own rule of statutory construction. In other
words, the Act itself, in § 152(b), presents its own specific
instructions regarding the correct approach to the statute which
applies to how we should read § 220.
[
Footnote 6]
Respondents insist that the legislative history of the section
proves that it was intended to provide the FCC with power to
preempt state regulation over depreciation practices. They rely in
particular on the fact that Congress, in drafting § 220, reenacted,
almost verbatim, § 20(5) of the Interstate Commerce Act, 49
U.S.C.App. § 20(5), which, respondents contend, had already been
construed to require the ICC to prescribe depreciation for both
telephone companies and railroads.
Telephone and Railroad
Depreciation Charges, 118 I.C.C. 295 (1926). Respondents note
further that, during hearings on an early version of the Act, state
commissioners testifying before Congress argued that reenactment of
§ 20(5) and other provisions would permit the FCC to usurp "[a]ll
matters of depreciation . . . without regard to the action upon the
same subject by the State Commission." Hearings on S. 6 before the
Senate Committee on Interstate Commerce, 71st Cong., 2d Sess., pt.
15, p. 2243 (1930) (resolution of Montana Commission). They also
note that state regulators did manage -- initially -- to persuade
the drafters of the Act to add a new § 220(j), which expressly
permitted the States to prescribe their own depreciation practices
for the purposes of determining intrastate rates. The fact that
this section was rejected by the Conference Committee, despite the
strong support of the States, we are told, is strong evidence that
Congress intended to preserve in the FCC the broad power over
depreciation that had been conferred on the ICC.
We are not persuaded. First, § 20(5) of the Interstate Commerce
Act had never been interpreted to prohibit state commissioners from
requiring carriers to keep additional records for the purposes of
intrastate ratemaking. As the FCC itself noted in its 1982 order
denying preemption,
Uniform System of Accounts, 89
F.C.C.2d 1094, 1101, it was only in dictum that the ICC suggested
that it possessed authority under § 20(5) to prescribe depreciation
for all property that might be used in interstate commerce, and
that dictum did not even purport to address whether federal
prescription of depreciation would preempt the States from
prescribing additional depreciation practices for its regulatory
purposes. Moreover, that is how this Court read the ICC order.
Smith v. Illinois Bell Telephone Co., 282 U.
S. 133,
282 U. S. 159
(1930). And in
Northwestern Bell Telephone Co. v. Nebraska
State Railway Comm'n, 297 U. S. 471,
297 U. S. 478
(1936), we expressly left open whether an ICC prescription, if
issued, would be preemptive of state regulation.
Moreover, while it is true that Congress rejected the
state-propsed § 220(j), again, as the FCC noted in its order
denying preemption, respondents make too much of too little.
"The record of the Congressional hearings indicates little more
than that the supporters of original section 220(j) believed that
the provision was desirable to resolve a previous unsettled point
of law under the predecessor provision of the Interstate Commerce
Act. . . . At most, this legislative history indicates that the
1934 Congress was not sure whether reenactment of the Interstate
Commerce Act language would or would not preempt state accounting
and depreciation rules, and did not choose to resolve the question
at that time."
89 F.C.C.2d at 1103, 1106.