On Tuesday, the Sixth Circuit upheld a district court decision which found that the Kentucky Public Service Commission (“Commission”) had wrongly interpreted two federal regulations and was preempted from bringing state law claims against AT&T Kentucky.  BellSouth Telecommunications v. Kentucky Public Service Commission.pdf  The dispute arose out of the Telecommunications Act of 1996 which imposed certain duties on existing telephone service providers to allow for greater competition, including that they must provide certain network elements to competitors at a regulated rate.  In 2003, the FCC determined that existing providers no longer needed to provide some of these network elements under § 251 of the Act.  Despite that, some of AT&T’s competitors asked the Commission to force AT&T to continue following the repealed regulation.  The Commission attempted to do so, but was enjoined by the district court.  The Commission then attempted to achieve the same objective by purporting to act under § 271 of the Act.  The district court also enjoined this effort.  After being enjoined twice while attempting to act under the federal statutes and regulations, the Commission attempted to use its authority under state law to force AT&T to provide the network elements at the regulated rate.  AT&T sought an injunction of this order as well, which the district court largely granted. 

The Sixth Circuit held that the Commission had no power to enforce § 271 of the Act.  Only the FCC has power to enforce § 271 of the Act, “subject only to the requirement that it ‘consult’ with state commissions ‘to verify the compliance of the Bell operating company’ with the statute’s substantive mandates.”  The Commission’s only recourse under § 271 was to file a complaint with the FCC. 

The Sixth Circuit also held that the Commission had no power to enforce § 271 under state law.  The Commission attempted to act based on its authority to set “fair, just and reasonable” rates.  However, the Sixth Circuit found that the Commission’s actions would have conflicted with federal law because it would have imposed a rate other than the market rate as required by federal statute.  In such a case, unless the state’s action is subject to the savings clause, state law must yield.