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                                Before the                                 
                     Federal Communications Commission
                          Washington, D.C. 20554


In the matter of)
     )     
Petition of Pittencrieff Communications, Inc.     )     File No. WTB/POL 96-2
for Declaratory Ruling Regarding )
Preemption of the Texas Public Utility )
Regulatory Act of 1995)



                       MEMORANDUM OPINION AND ORDER


      Adopted:  September 25, 1997            Released:  October 2, 1997 


By the Commission:


                             Table of Contents
                                                              Paragraph no.

I.    INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

II.   EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . .  3

III.  BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
 
IV.   DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
 A.   Section 332(c)(3)  . . . . . . . . . . . . . . . . . . . . . . . . 13
 B.   Section 253  . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
 C.   Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

V.    CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

VI.   ORDERING CLAUSE  . . . . . . . . . . . . . . . . . . . . . . . . . 38
 

                            I.     INTRODUCTION

 1.   In April 1995, Texas enacted the Public Utility Regulatory Act of 1995
("PURA95"), comprehensive legislation regarding utility regulation and competition in Texas. 
Two provisions of PURA95, sections 3.606 and 3.608 (collectively, the "Texas statute"), seek
to advance the goals of providing universal service for consumers and telecommunications
equipment for educational institutions, in part by requiring commercial mobile radio service
("CMRS") providers operating in Texas to contribute to two funds.  Section 3.606 establishes
the Telecommunications Infrastructure Fund ("TIF") to provide funding to public schools in
Texas for the purchase, installation, and maintenance of equipment and general infrastructure,
including the cost of building a statewide telecommunications network.  Section 3.608
establishes the Universal Service Fund ("USF") to assist local exchange companies in Texas
to provide basic telecommunications service to rural areas and to reimburse local exchange
carriers for revenues lost as a result of providing telecommunications assistance to the hearing
impaired.  

 2.   On January 11, 1996, Pittencrieff Communications, Inc. ("PCI") filed a Petition
for Declaratory Ruling ("PCI petition") asking the Commission to declare that section
332(c)(3) of the Communications Act of 1934, as amended ("the Communications Act"),
preempts sections 3.606 and 3.608 of PURA95.  PCI alleges that the Texas statute
contravenes the plain wording of Section 332(c)(3) that no state shall regulate the entry of or
the rates charged by CMRS providers and does not come within the exception for regulation
of "other terms and conditions" of service.  We issued a Public Notice on July 18, 1996,
seeking public comment on the PCI petition and the effect on that petition of a Texas state
court decision regarding section 3.606.  Nine parties filed comments and six parties filed
reply comments.  For the reasons set forth herein, we deny PCI's
petition.

                         II.     EXECUTIVE SUMMARY

 3.   The Commission addressed whether section 332(c)(3) preempts a state
requirement that CMRS providers contribute to a state universal service support mechanism
when it adopted rules to implement section 254 of the Communications Act.  In that
proceeding, the Commission found "that section 332(c)(3) does not preclude states from
requiring CMRS providers to contribute to state [universal service] support mechanisms." 
We affirm the decision in the Universal Service Order on this issue and find that section
332(c)(3) does not preempt Texas from requiring CMRS providers to contribute to state
universal service mechanisms such as the Telecommunications Infrastructure Fund or the
Universal Service Fund.

 4.   Although section 332(c)(3) prohibits states from regulating CMRS rates and
entry, it permits states to regulate the terms and conditions under which CMRS is provided. 
We find that a requirement for CMRS providers to contribute on an equitable and
nondiscriminatory basis to state universal service support mechanisms falls within a state's
lawful authority and therefore falls within the "other terms and conditions" language of
section 332(c)(3)(A). Congress specifically gave states the authority to require CMRS
providers to contribute to state universal service support mechanisms in section 254(f) of the
Communications Act.  According to that section, "[e]very telecommunications carrier that
provides intrastate telecommunications services shall contribute, on an equitable and
nondiscriminatory basis, in a manner determined by the State to the preservation and
advancement of universal service in that state."  The definition of  "telecommunications
carrier" includes CMRS providers.  We conclude that an interpretation of section 332(c)(3)
that excludes CMRS providers from making contributions to state universal service
mechanisms would contradict the direct language of section 254(f) that "every
telecommunications carrier" contribute. 

 5.   Section 332(c)(3) also provides that "[n]othing in this subparagraph shall
exempt providers of commercial mobile services (where such services are a substitute for land
line telephone exchange service for a substantial portion of the communications within such
State) from requirements imposed by a State commission on all providers of
telecommunications services necessary to ensure the universal availability of
telecommunications services at affordable rates."  We believe this provision applies only to a
state's authority to impose requirements that would otherwise constitute regulation of rates or
entry. In that situation, a state would have to comply with section 332(c)(3) by showing that
CMRS is "a substitute for land line telephone exchange service for a substantial portion of the
communications within such State."  The state is not required to demonstrate that CMRS is a
substitute for land line service, however, when it requires a CMRS provider to contribute to
the state's universal service mechanisms on an equitable and nondiscriminatory basis, in
compliance with section 254(f). 

 6.   We further find that the Texas statute does not violate section 253 of the
Communications Act, which contains a broad prohibition on state or local statutes that may
have the effect of prohibiting the ability of any entity to provide any interstate or intrastate
telecommunications service.  Finally, we hold that the arguments that section 3.606 of the
Texas statute discriminates against CMRS providers are moot in light of the subsequent
amendments to that section, and we reject arguments that the TIF is not a universal service
support mechanism. 

                            III.     BACKGROUND

 7.   Section 3.606 of PURA95 establishes the TIF and a nine-member board to
administer it.  The purpose of the TIF is to fund equipment purchases, including computers,
printers, computer labs, and video equipment for public schools; to fund intracampus and
intercampus wiring to enable those schools to use such equipment; and to fund any state
telecommunications network.  The statute requires CMRS providers and telecommunications
utilities doing business in Texas to contribute to the TIF.  The Texas legislature specifically
found that CMRS providers should contribute to the TIF because they "benefit from the
public telecommunications network by the ability to originate and terminate calls that
transverse mobile and cellular network[s] and that they will benefit by virtue of the
advancement of the public telecommunications network through projects funded under this section."

 8.   As originally passed, section 3.606 set up two accounts within the TIF:  the
telecommunications utilities account and the commercial mobile services providers account. 
Each account was to collect $75 million per year for ten years, beginning with the 1995-1996
fiscal year.  In order to fund the commercial mobile service providers account, the Texas
Comptroller was directed to assess each CMRS provider doing business in Texas "in
accordance with the ratio that the annual taxable telecommunications  receipts reported by
that provider [for sales tax purposes] . . . bears to the total annual taxable telecommunications
receipts reported by all commercial mobile service providers [for sales tax purposes] . . . ." 
The telecommunications utility account was to be funded by similar assessments on
telecommunications utilities.

 9.   On February 5, 1996, a Texas state court held that section 3.606 of PURA95
violated the Texas constitutional requirement of equal and uniform taxation "to the extent that
it imposes on  . . . paging service providers and other [CMRS providers] an assessment in
excess of the assessment imposed on telecommunications utilities. . . ."  The judgment
directed the Texas Comptroller, "at each time when the Telecommunications Infrastructure
Fund Assessments are made, to determine the percentage assessments that are necessary to
fund the Telecommunications Utilities Account and the [CMRS providers'] account at $75
million per year, and to assess paging service providers and other [CMRS providers] at the
lower of the two percentages."  Thus under the court's holding, CMRS providers were
assessed for contributions to the TIF at the same rates as telecommunications utilities.  

 10.  The Texas legislature has subsequently amended section 3.606 to eliminate the
separate accounts for telecommunications utilities and CMRS providers and to change the
annual assessment made for the TIF.  Under the amended provision, the TIF consists of only
one account into which both telecommunications utilities and CMRS providers pay.  Each
telecommunications utility and CMRS provider doing business in Texas is required to pay an
annual assessment of 1.25 percent of taxable telecommunications receipts.  The total amount 
that is to be deposited into the TIF over time is limited to $1.5 billion.  When the TIF
approaches the cap, the Texas Comptroller is directed to reduce the assessment so that the
fund will not exceed $1.5 billion in cumulative deposits.
  
 11.  Section 3.608 of PURA95 directs the Public Utility Commission of Texas
("Texas PUC") to adopt rules establishing the USF.  The purposes of the fund are:  to assist
local exchange companies ("LECs") in providing basic local telecommunication services at
reasonable rates in high cost areas; to reimburse LECs for revenues lost as a result of
providing tel-assistance service; to reimburse the telecommunications carrier providing the
statewide telecommunications relay access service for the hearing-impaired; and to reimburse
the Texas Department of Human Services and the Texas PUC for costs incurred in
implementing the provisions of PURA95 relating to tel-assistance and universal service.

 12.  Section 3.608 provides for the funding of the USF as follows:

      The universal service fund shall be funded by a statewide
      uniform charge, at rates and on services determined by the
      [Texas PUC], payable by all telecommunications providers that
      have access to the customer base.  In establishing the uniform
      level of the charge and the services to which it will apply, the
      [Texas PUC] may not make or grant an unreasonable preference
      or advantage to a telecommunications provider or subject a
      telecommunications provider to unreasonable prejudice or
      disadvantage.

The term "telecommunications provider" includes CMRS providers.  The Texas PUC has not
yet promulgated rules implementing the new Texas USF, and thus, unlike the TIF, there have
been no collections from CMRS providers.

                            IV.     DISCUSSION

 A.   Section 332(c)(3)

 13.  In its petition, PCI claims that section 332(c)(3)(A) preempts a state from
requiring CMRS providers to contribute to that state's universal service fund, unless the state
demonstrates that CMRS services "are a substitute for land line telephone exchange service
for a substantial portion of the communications within such State."  The same argument was
made by several commenters in the proceeding to implement section 254.   In that
proceeding the Commission agreed with the Federal-State Joint Board "that section 332(c)(3)
does not preclude states from requiring CMRS providers to contribute to state [universal
service] support mechanisms."  We affirm the decision in the Universal Service Order on
this issue and find that section 332(c)(3) does not preempt Texas from requiring CMRS
providers to contribute to state universal service mechanisms such as the Telecommunications
Infrastructure Fund or the Universal Service Fund.  We also note that a federal district court
recently reached the same conclusion in reviewing a challenge to a Kansas statute that
requires CMRS providers to contribute to that state's universal service fund.

 14.  The first two sentences of section 332(c)(3)(A) are relevant to the issues in this
proceeding.  They provide that:

 . . . no State or local government shall have any authority to regulate the entry
 of or the rates charged by any commercial mobile service or private mobile
 service, except that this paragraph shall not prohibit a State from regulating the
 other terms and conditions of commercial mobile services.  Nothing in this
 subparagraph shall exempt providers of commercial mobile services (where
 such services are a substitute for land line telephone exchange service for a
 substantial portion of the communications within such State) from requirements
 imposed by a State commission on all providers of telecommunications services
 necessary to ensure the universal availability of telecommunications services at
 affordable rates." 

 We address issues regarding each of these two parts of section 332(c)(3)(A) in turn.

 15.  Regulation of Entry and Rates.  PCI and the commenters supporting
preemption argue that the Texas statute requiring CMRS providers to contribute to the Texas
TIF and USF is rate and entry regulation under section 332(c)(3), and does not come within
state authority over "other terms and conditions" of service.  They contend that the
contribution requirements can be construed as rate regulation because they increase the costs
of operating CMRS in Texas and thus have an impact on the rates charged.  They also
contend that the requirements act as a form of entry regulation because unless a CMRS
provider complies with the regulations the CMRS provider may not provide service in
Texas.  Texas and SWBT, on the other hand, argue that because the Texas statute does not
prescribe, set, or fix the rates charged by CMRS providers, the contribution requirements are
not a form of rate regulation.  They also contend that the Texas statute is not a form of
entry regulation because it is not directed toward the entry of CMRS providers in Texas. 
Rather, SWBT and Texas assert that requiring CMRS providers to contribute to the Texas TIF
and USF is a permissible exercise of the state's authority to set terms and conditions on the
provision of CMRS in Texas.

 16.  We agree with Texas that the requirement for CMRS providers to contribute on
an equitable and nondiscriminatory basis to a state universal service support mechanism falls
within the "other terms and conditions" language of section 332(c)(3)(A) and is neither a rate
nor an entry regulation. Although the statute itself does not provide a definition of "other
terms and conditions," the legislative history shows that Congress intended that phrase to
include "such other matters as fall within a state's lawful authority."  The House Report
explains the meaning of "terms and conditions" as follows:     

 By "terms and conditions," the Committee intends to include such matters as
 customer billing information and practices and billing disputes and other 
 consumer protection matters; facilities siting issues (e.g. zoning); transfers of
 control; the bundling of services and equipment; and the requirement that
 carriers make capacity available on a wholesale basis or such other matters as
 fall within a state's lawful authority.  This list is intended to be illustrative only
 and not meant to preclude other matters generally understood to fall under
 "terms and conditions."

 17.  We find that, in this instance, requiring telecommunications carriers, including
CMRS providers, to contribute to a state's universal service fund is not a rate or entry
regulation, but rather falls within the "other terms and conditions" language of section
332(c)(3)(A) and thus is within a state's lawful authority under the Communications Act. 
Indeed, here, the contours of state authority are expressly provided in the Communications
Act in section 254(f), which was added by the Telecommunications Act of 1996 ("1996
Act"), and which specifically states that "[e]very telecommunications carrier that provides
intrastate telecommunications services shall contribute, on an equitable and nondiscriminatory
basis, in a manner determined by the State to the preservation and advancement of universal
service in that state."  CMRS providers are "telecommunications carrier[s]" under the
Communications Act because they offer "telecommunications for a fee directly to the
public."  In interpreting section 254(d), which uses the same language as section 254(f),
except that it refers to interstate telecommunications services, we found that CMRS
providers are "telecommunications carriers," and consequently must contribute to the federal
universal service support mechanisms.

 18.  We are not persuaded by PCI's arguments that contributing to a state's universal
service support mechanisms is a rate or entry regulation, and does not come within the "other
terms and conditions" language in section 332(c)(3).  PCI and several other commenters argue
that "other terms and conditions," while not limited to only the specific items listed in the
House Report, is limited to matters concerning consumer protection and the promotion of
competition.  Nothing in the plain language of the statute, however, suggests any such
limitation.  We also note that the House Report specifically states that the items listed are
only illustrative and do not represent the extent of those matters which are to be considered
"other terms and conditions."  Here, Texas, consistent with section 254(f), has required
CMRS providers to contribute equitably to universal service support as a condition under
which their service is offered.  As explained below, Texas' universal service contribution
requirement is not, within the plain meaning of the statute, a rate or entry regulation.  Thus,
we believe that such a requirement, under the circumstances of this case, falls within the
ambit of "other terms and conditions" of service.
  
 19.  Several commenters further note that in the Commission's decisions denying
several states' requests to retain rate regulation authority over CMRS, the Commission has
previously found the "other terms and conditions" language only grants a state authority "to
monitor the structure, conduct, and performance of CMRS providers in that state."  These
commenters argue that neither the purpose nor the effect of the Texas statute is to monitor the
structure, conduct, or performance of CMRS providers, and therefore that the Texas statute is
not a permissible regulation of "other terms and conditions" of service.  In the cases cited by
the commenters, the Commission did not attempt to set out the parameters of the "other terms
and conditions" language.  Rather, the Commission merely listed some examples of matters
that come within that phrase, including a state's ability to monitor the structure, conduct, and
performance of CMRS providers as well as to conduct complaint proceedings regarding a
CMRS provider's customer billing information and practices.  Thus, our decision here does
not conflict with the Commission's analysis in those proceedings, but continues our case-by-
case determination of what matters come within the meaning of "other terms and conditions,"
as opposed to rate and entry regulation.

  20.      We are also unpersuaded by PCI's argument that these requirements serve "to
regulate the entry of or the rates charged by" any CMRS provider.  PCI and several other
commenters contend that contributing to the Texas TIF and USF increases the cost of doing
business in Texas and therefore impacts the rates that a CMRS provider charges its
customers.  We agree with Texas and SWBT that such an indirect relationship between the
Texas statute and the rates charged by a CMRS provider does not fall within the purview of
the preemption language in section 332(c)(3).  The Commission has found the "rates charged
by" language to prohibit states from prescribing, setting, or fixing rates of CMRS providers. 
We have not found, however, that it preempts state authority over matters which may have an
impact on the costs of doing business for a CMRS operator.  In the Louisiana Preemption
Decision the Commission found that state regulation of interconnection rates charged by local
exchange carriers, which clearly has an impact on a CMRS provider's cost of doing business,
is not prohibited per se by section 332(c)(3).  Likewise the Commission has stated that
section 332(c)(3) does not preempt other state regulatory activities, such as conducting
complaint proceedings concerning disputes over billing practices and requiring informational
filings, which impose costs on CMRS providers doing business in that state. 

  21.      In Mountain Solutions, the court found that an interpretation of section
332(c)(3)(A) that equates state actions that may increase the costs of doing business with rate
regulation "would have the effect of gutting nearly all regulatory authority over wireless
telecommunications, a result that Congress did not envision."  The court also noted that
compliance with state or local regulations regarding other items listed in the House Report as
permissible other terms and conditions, such as facilities siting, "necessarily entails the
expending of significant financial capital."  We agree with the court in Mountain Solutions
that there is "no functional difference between the 'terms and conditions' outlined in the House
[R]eport and the [universal service] contributions at issue here."

  22.      Similarly, we are unpersuaded that the Texas statute should be preempted as an
entry regulation.  PCI contends that the Texas statute is an entry barrier because unless a
CMRS provider complies with the statute it may not enter or provide service in Texas. 
Texas disagrees, and contends that no Texas agency has the authority to stop a CMRS
provider from providing service, but rather that enforcement will be accomplished through a
suit to compel compliance, in other words, to make the appropriate payments to the Texas
TIF and USF.  Other commenters argue that the Texas statute is a barrier to entry because it
imposes a fee on CMRS providers which increases the cost of doing business and delays the
profitability of new entrants.  Clearly the Texas statute is not a direct regulation of entry. 
Although the contribution requirements arguably indirectly regulate entry by making it more
difficult for some carriers to offer service, this is true of many of the requirements that
Congress intended to include within "other terms and conditions" of service.   Under the
circumstances of this case, we do not conclude that these indirect effects render the Texas
statute "regulation of entry" within the meaning of section 332(c)(3).

  23.      Substitute for Land Line Telephone Exchange Service.  PCI and several other
commenters argue that in order for a state to require a CMRS provider to contribute to state
universal service support mechanisms, the state must first demonstrate that CMRS is "a
substitute for land line telephone exchange service for a substantial portion of the
communications within such State."  We disagree, finding that the above quoted language in
section 332(c)(3) concerns a state's authority to regulate the rates charged by CMRS providers
to their customers for the provision of universal service, not the state's authority to require
CMRS providers to contribute to state mechanisms used to support universal service in that
state as part of its general authority to regulate "other terms and conditions" of CMRS.  

  24.      Section 332(c)(3)(A) deals with a state's authority to regulate the rates charged
by CMRS providers and their efforts to enter the CMRS marketplace.  The first sentence of
the subparagraph generally prohibits states from regulating rates and entry (but, as discussed
above, does not prohibit states from regulating "other terms and conditions" of CMRS).  The
second sentence sets forth a specific exception for universal service rate and entry regulation
where CMRS is a substitute for land line telephone exchange services for a substantial portion
of the communications within such State. That is, states generally are precluded from
regulating the rates that CMRS providers may charge in order to recover their universal
service support contributions except where CMRS serves as a substitute for land line service. 
Thus, we find, as did the court in Mountain Solutions, that the second sentence refers to a
state's exercise of authority that would otherwise constitute prohibited regulation of rates or
entry, and that the second sentence does not affect a state's ability to require universal service
support contributions if these contributions constitute "other terms and conditions" of
CMRS.  The Mountain Solutions court specifically found that "[t]he universal service
language contained in the second sentence of section 332(c)(3)(A) merely clarifies that states
wishing to ensure the universal availability of affordable telecommunications services may
regulate the rates and market entry of commercial mobile service providers if certain
preconditions are satisfied.  Nothing in that sentence indicates any intent to prevent states
from attempting to guarantee universal availability of telecommunications services through
means other than rate or market entry regulation." As we discussed above, requiring CMRS
providers to contribute to state universal service support mechanisms does not constitute
regulation of entry or the rates charged by a CMRS provider under section 332(c)(3), but
instead constitutes regulation of "other terms and conditions" of CMRS.  Consequently, we do
not find that the second sentence of section 332(c)(3)(A) is implicated by merely requiring a
CMRS provider to contribute on an equitable nondiscriminatory basis to state universal
service support mechanisms.  

  25.      This interpretation of section 332(c)(3) gives meaning to both section 332(c)(3)
and section 254(f).  As the commenters agree, the various provisions of a statute should be
read to give effect to each provision and so as not to create a conflict between the
provisions.  Like the Mountain Solutions court, we do not find any "irreconcilable
inconsistency between the two statutes."  By reading section 254(f) to deal with
contributions to a state's universal service mechanism and section 332(c)(3) to deal with
regulation of entry and the rates charged by CMRS providers, both provisions of the statute
are given meaning.  We agree with the court in Mountain Solutions that the second sentence
of section 332(c)(3)(A) creates an exception to the first sentence of section 332(c)(3)(A), not
to section 254(f).  If we were to read section 332(c)(3) to preclude CMRS providers from
making contributions to state universal service support mechanisms, as suggested by PCI and
several commenters, that reading would contradict the direct language of section 254(f) that
"every telecommunications carrier" must contribute.  Further, because this approach
harmonizes the provisions of section 332(c)(3) and section 254(f), it complies with the
requirement not to construe the 1996 Act "to modify, impair, or supersede" federal, state, or
local law absent an express provision to that effect.  Moreover, contrary to the suggestion of
the commenters, our reading does not render the the second sentence meaningless because,
under our reading, the second sentence of section 332(c)(3) prohibits states from regulating
the rates CMRS providers carriers charge (e.g., requiring CMRS carriers to charge lower rates
than they otherwise would charge), except where necessary to ensure universal service.  This
exception to low-income consumers as part of a universal service program logically applies
only where CMRS has become vital to universal service, such as where it has become a
"substitute for land line telephone exchange service for a substantial portion of the
communications within such state. . . ." 

  26.      Moreover, section 254(f) specifically requires that "every telecommunications
carrier that provides intrastate telecommunications services shall contribute . . . to the
preservation and advancement of universal service" in a state.  Thus, even if section
332(c)(3) could be read to prohibit states from collecting universal service contributions from
CMRS providers, section 254(f) specifically requires universal service contributions from all
intrastate telecommunications carriers, which would include CMRS providers.  We find that
because section 254(f) was enacted later in time and speaks directly to the issue at hand, it
would take precedence over section 332(c)(3) if the two provisions were found to be inconsistent.

  27.      We note that a Connecticut state court has found that the second sentence of
section 332(c)(3)(A) prohibits Connecticut from requiring CMRS providers to contribute to
that state's universal service fund.   Like the court in Mountain Solutions, we decline to
follow that  decision.  In the Metro Mobile decision, the state court found that because the
first sentence of section 332(c)(3)(A) exempts state authority over "other terms and
conditions" from preemption, the second sentence of that section would be redundant if
universal service contributions were considered to fall within "other terms and conditions." 
The court therefore concluded that CMRS providers "in states in which [CMRS] is not a
substitute for land line service fall under the umbrella of federal preemption." The state
court did not look at the legislative history regarding this language.  In Mountain Solutions
the court specifically rejected the "redundancy" argument used by the Metro Mobile court. 
We agree, finding, as discussed above, that the two sentences are not redundant, but rather
that the second sentence concerns the conditions under which a state may regulate rates and
entry in order to ensure the provision of universal service in that state.

  28.      We also believe that the Metro Mobile court was incorrect in not looking to the
legislative history to help clarify the meaning of "other terms and conditions."  We do not
find, as the Metro Mobile court did, that there is no ambiguity in the meaning of "other terms
and conditions."  We note that in its analysis the Metro Mobile court did not address the
requirements set forth in section 254.  Indeed, in acting on petitions regarding the "other
terms and conditions" language the Commission has specifically looked to the legislative
history. As we discussed above, we find that legislative history shows that requiring a CMRS
provider to contribute, on an equitable and nondiscriminatory basis, to state universal service
mechanisms does come within the "other terms and conditions" language of section 332(c)(3),
and is consistent with the explicit language of section 254(f).    

  B.       Section 253

  29.      Several commenters argue that section 253 of the Communications Act
provides an additional basis for preempting  the Texas statute.  Section 253 was added by
the 1996 Act subsequent to PCI's filing of its petition, and concerns the removal of barriers to
entry. Section 253(a) providers in relevant part:

  (a)  IN GENERAL.  -- No State or local statute or regulation, or other State or
  local legal requirement, may prohibit or have the effect of prohibiting the
  ability of any entity to provide any interstate or intrastate telecommunications
  service.

  (b)  STATE REGULATORY AUTHORITY. -- Nothing in this section shall
  affect the ability of a State to impose, on a competitively neutral basis and
  consistent with section 254, requirements necessary to preserve and advance
  universal service, protect the public safety and welfare, ensure the continued
  quality of telecommunications services, and safeguard the rights of consumers.

                               *     *     *

  (d)  PREEMPTION.  -- If, after notice and an opportunity for public comment,
  the Commission determines that a State or local government has permitted or
  imposed any statute, regulation, or legal requirement that violates subsection (a)
  or (b), the Commission shall preempt the enforcement of such statute,
  regulation, or legal requirement to the extent necessary to correct such violation
  or inconsistency.

  (e)  COMMERCIAL MOBILE SERVICE PROVIDERS.  --  Nothing in this
  section shall affect the application of section 332(c)(3) to commercial mobile
  radio providers.

  30.      Sprint contends that "Section 253(a) sweeps broadly in its preemption of state
entry barriers, because Congress was committed to enabling new entrants to compete with
entrenched telecommunications providers."  It argues that Section 253(a) not only preempts
state or local statutes or regulations, but it also preempts state or local legal requirements that
have the effect of prohibiting entry in providing telecommunications services.  Sprint
concludes that Congress intended to preempt any entry fees or taxes that could serve as an
entry barrier to new telecommunications providers.  Texas maintains that none of the parties
have submitted evidence demonstrating that the costs imposed by either sections 3.606 or
3.608 are so unreasonable or excessive as to effectively prohibit any CMRS provider from
operating in Texas.  It further claims that the TIF contributions have no greater effect on
new entrants than on existing carriers because while they are generating little or no revenue,
their payment obligations will be minimal.  Both Texas and SWBT argue that section 253(a)
does not preempt the Texas statute because section 253(b) specifically excludes state
regulation promulgated in accordance with section 254 from the purview of section 253(a). 

  31.  The Texas statute clearly does not directly prohibit any entity from providing a
telecommunications service.  In the case where two cities denied franchises to an applicant
seeking to provide telecommunications services based upon their determination that only one
carrier should be permitted to offer land line telephone service, the Commission found that
such an absolute prohibition on a carriers' competitive entry "is precisely the type of action
Congress intended to proscribe under section 253(a). . . "    The Commission has also held
that a state cannot consistent with section 253(a) limit the class of entities that may provide
pay telephone service.  In this case, however, the Texas statute requiring CMRS providers to
contribute to the state's universal service support mechanisms clearly does not expressly
prohibit CMRS providers from providing either intrastate or interstate service in Texas. 
Indeed, the record shows that no Texas agency may withhold a license, certificate or other
operating authority if a CMRS provider fails to pay its required contributions pursuant to
PURA95.  

  32.      We also do not find, based on the record before us, that the Texas statute "has
the effect of prohibiting the ability of any entity to provide any interstate or intrastate
telecommunications service." In determining whether a state or local requirement has the
effect of prohibiting an entity from providing telecommunications services we consider
whether the requirement in question materially inhibits or limits the ability of any competitor
or potential competitor to compete in a fair and balanced legal and regulatory environment.  
Based on the record before us, we cannot conclude that the Texas statute prohibits the ability
of CMRS providers to provide telecommunications service in Texas.  As we have discussed
above, the requirement to contribute to the Texas universal service support mechanisms is
applied to all telecommunications carriers in Texas on a nondiscriminatory basis.  Although
we do not preclude the possibility that even a neutral contribution requirement might under
some circumstances effectively prohibit an entity from offering a service, there is no evidence
on this record that these requirements actually have such an effect. Consequently, we do not
find in this proceeding that the Texas statute falls within the proscription of section 253(a).

  33.      In view of our conclusion that the Texas statute does not fall within the
proscription of section 253(a), we need not address whether the statute falls within the
authority reserved to the states in section 253(b). We note that section 253(b) permits states to
impose certain types of requirements, including universal service requirements,
notwithstanding section 253(a), if the conditions set forth in section 253(b) are satisfied.  In
order to satisfy section 253(b), a universal service requirement must be (1) competitively
neutral, (2) consistent with section 254, and (3) necessary to preserve and advance universal
service.  Thus, if we were to find in some other case that a universal service contribution
requirement falls within the proscription of section 253(a), we would then examine whether
the requirement falls within the authority reserved to the states in section 253(b). 

  34.      Several parties also cite section 253(e) in arguing that Congress did not amend
the Commission's preemption authority under section 332(c)(3) with the passage of the 1996
Act.  We agree with the commenters that our preemption authority under section 332(c)(3)
was not altered by the passage of the 1996 Act.  As we discussed previously, however, we do
not find that section 332(c)(3) precludes Texas from requiring CMRS providers to contribute
to its state universal service mechanisms.  Consequently, this argument does not affect our
decision.

  C.       Other Issues

  35.      AirTouch, Pagemart, and RCA argue that because section 3.606 "singles out"
CMRS providers, it discriminates against CMRS providers.  This argument is moot in light
of the Texas court decision in PCFA v. Sharp that section 3.606, as originally enacted,
violated the Texas constitution, and the subsequent amendment of that section.  As
described earlier, the Texas legislature has amended section 3.606 to eliminate the separate
TIF accounts for telecommunications utilities and CMRS providers and to establish a uniform
assessment level for both types of carriers.  Consequently, the Texas statute, as amended, does
not "single out" CMRS providers, but treats them the same as other telecommunications
carriers.

  36.      PCI and AMTA argue that the Texas TIF is not a universal service fund, and
therefore cannot come under the universal service provisions of section 332(c)(3).  The
Texas TIF is intended to provide support for equipment and infrastructure needed for distance
learning, information sharing programs of libraries, and telemedicine services.  As SWBT
notes, the goals of the Texas TIF are the same as those encompassed in section 254(h).  We
find that these activities come within the purview of intrastate universal service envisioned in
section 254(f).  That section allows states to "adopt regulations to provide for additional
definitions and standards to preserve and advance universal service within that State only to
the extent that such regulations adopt additional, specific, and sufficient mechanisms to
support such definitions or standards that do not rely on or burden Federal universal service
support mechanisms."  PCI and the other commenters have not argued that the Texas TIF
does not meet those requirements.  We note that the federal universal service support
mechanisms clearly provide for support for public schools, libraries, and rural health care
facilities.  Although the Texas TIF provides support for activities beyond those included in
the federal universal service support mechanisms, there is no evidence in the record of this
proceeding that the Texas TIF exceeds the state's authority to establish state universal service
support mechanisms under section 254(f).

                                    V.        CONCLUSION

  37.      In this Order, we reaffirm the Commission's decision in the Universal Service
Order that section 332(c)(3) does not preclude states from requiring CMRS providers to
contribute to state universal service support mechanisms.  We find that the Texas statute
requiring CMRS providers to contribute to the TIF and USF does not violate the prohibition
of state entry and rate regulation of CMRS providers in section 332(c)(3), and therefore we do
not preempt the Texas statute.  Section 254(f) specifically authorizes a state to require
contributions from "every telecommunications carrier," including CMRS providers.  We
conclude that an interpretation of section 332(c)(3) that excludes CMRS providers from
making contributions to state universal service mechanisms would contradict that direct
language of section 254(f).  Further, we believe that these two provisions can be reconciled,
consistent with the statutory language of section 332(c)(3), by interpreting the prohibition on
state regulation of CMRS providers in section 332(c)(3) to apply to universal service
requirements that would otherwise constitute regulation of entry or rates charged by CMRS
providers.  Because the Texas statute does not direct the CMRS providers to recover their
contributions to TIF and USF through the rates they charge their customers, we find the
Texas statute does not implicate the prohibition on state regulation in section 332(c)(3), and
therefore we do not preempt sections 3.606 and 3.608 of the PURA 95.

                          VI.     ORDERING CLAUSE

  38.      Accordingly, IT IS ORDERED that, pursuant to sections 4(i), 253, 254(f), and
332(c)(3) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 253, 254(f),
and 332(c)(3), and section 1.2 of the Commission's rules, 47 C.F.R.  1.2, the Petition for
Declaratory Ruling Regarding Preemption of the Texas Public Utility Regulatory Act of 1995
filed by Pittencrieff Communications, Inc. IS DENIED.

                            FEDERAL COMMUNICATIONS COMMISSION



                            William F. Caton
                            Acting Secretary