NEW JERSEY PAYPHONE ASSOCIATION, INC, a not for profit corporation organized under… v. Town of West New York

PRECEDENTIAL
Filed July 26, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-1917
NEW JERSEY PAYPHONE ASSOCIATION,
INC, a not for profit corporation organized
under the laws of New Jersey,
v.
TOWN OF WEST NEW YORK,
Appellant.
ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(District Court No. 00-cv-01843)
District Court Judge: Alfred M. Wolin
Argued: March 5, 2002
Before: ALITO, RENDELL, and HALL,1
Circuit Judges.
(Opinion Filed: July 26, 2002)
Joseph R. Mariniello (Argued)
Mariniello & Mariniello, P.C.
265 Columbia Avenue
Fort Lee, N.J., 07024
Counsel for Appellant
_________________________________________________________________
1. The Honorable Cynthia Holcomb Hall, Circuit Judge for the Ninth
Circuit, sitting by designation.
Jeffrey A. Donner (Argued)
Stryker Tams & Dill, LLP
Two Penn Plaza East
Newark, N.J., 07105
Counsel for Appellee
OPINION OF THE COURT
HALL, Circuit Judge:
The Town of West New York appeals the District Court’s
grant of summary judgment finding an ordinance of the
town preempted by Section 253 of the Telecommunications
Act of 1996, codified at 47 U.S.C. S 253. The ordinance

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permits the town to grant an exclusive franchise to one or
two pay telephone providers to provide telephone service on
public rights of way. The franchise is to be awarded
pursuant to a formal auction process and is to be based on
several criteria, primarily the amount of compensation
offered to the town by the bidder. The town denies that the
ordinance has the effect of prohibiting pay telephone
providers from providing pay telephone service in violation
of 47 U.S.C. S 253(a). It also claims in the alternative that
it falls within the Section 253(c) safe harbor protecting
municipal regulation of public rights of way from the
preemptive effect of Section 253(a). We affirm the ruling of
the District Court.
The District Court had original subject matter
jurisdiction pursuant to 28 U.S.C. S 1331. This Court has
jurisdiction pursuant to 28 U.S.C. S 1291. Although the
appeal was not initially timely, the District Court granted
an extension of time to file pursuant to Fed. R. App. P.
4(a)(5). That extension has not been appealed and this
appeal is within the extended time period granted by the
District Court.
I.
This appeal concerns the lawfulness of an ordinance
adopted on February 16, 2000 by the Town of West New
York, New Jersey (the "Town") regulating the placement of
2
pay telephones in public rights of way. Plaintiff-Appellee,
the New Jersey Payphone Association (the "Payphone
Association") is a not-for-profit organization whose
members operate payphones in the Town. The Payphone
Association challenged the Town’s Ordinance 26/99 (the
"Ordinance") on a number of grounds, alleging that it
violates Section 253 of the Telecommunications Act of 1996
(the "TCA"), 47 U.S.C. S 253; New Jersey statutory law; and
the United States and New Jersey Constitutions.
Citing the need to control the placement of pay
telephones on public rights of way in order to ensure the
safe passage of vehicular and pedestrian traffic and
promote an aesthetically pleasing environment, the
Ordinance requires prospective payphone operators to
obtain a local permit for each pay telephone specifying its
exact location. Historically, any service provider could
obtain such a permit subject to payment of a small fee and
satisfaction of certain minimum requirements as to the
maintenance, location, and specifications of their
payphones. In the current Ordinance, however, Section
Three specifies:
The Town reserves the right to award a Contract for
replacement or operation of [payphones] in the public
right-of-way of the Town and on Town owned property.
If the Town exercises such rights no other permits or
renewals for the operation of [payphones] shall be

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issued and any previously installed [payphones] shall
be removed from the public right-of-way within thirty
days.
J.A. at 74.
Pursuant to Section Three of the Ordinance, the town
issued a document entitled "Franchise for Public Pay
Telephones throughout the Town of West New York" (the
"Franchise Notice"), inviting bids for contracts to provide
payphones. J.A. at 76-111. The Franchise Notice informs
bidders that the Town has been split into two zones for
bidding purposes with a separate auction for each zone.
Bidders are required to install between 75 and 100
payphones for each zone at locations to be determined by
the Director of Public Safety in consultation with the
3
successful bidder. The Franchise Notice also provides that
the Town is to be compensated based on a percentage of
revenue generated by the payphones. In addition, bidders
must demonstrate the ability to provide a security deposit
of $250 per proposed telephone, or at least $18,750.
The Franchise Notice also sets out the criteria used by
the Town in evaluating bids. The Town is to evaluate bids
based on a list of seven factors including: the experience of
the applicant, the ability of the applicant to maintain the
pay telephones, the efficiency of the public service to be
provided, the willingness of the applicant to provide
telephones in historically under-served residential areas
lacking private telephones, the applicant’s history of
maintaining payphones within the Town, and the cost of
calls to the public. Also on the list of evaluation criteria is
the amount of compensation offered to the Town by the
applicant. The purchasing agent for the Town forthrightly
testified by affidavit that he considered compensation to the
Town to be the most important factor in evaluating bids.
J.A. at 138-139.
As it happened, the initial attempt to auction service for
the two zones ended without any awards. Three companies
submitted proposals. The purchasing agent testified that
the three bids were largely equivalent except for the
compensation offered to the Town and the per-call cost to
the public. He determined that differences in billing
methods between the bidding companies in light of
inadequate bid specifications on the treatment of long
distance service created difficulties in evaluating the bids.
Accordingly, he recommended that all bids be rejected and
the specifications redrawn in order to conduct the auction
anew. After initiation of this suit, the parties agreed to take
no further action pending determination of the lawfulness
of the Ordinance and Franchise Notice.
The District Court issued an opinion granting summary
judgment for the Payphone Association and denying the
Town’s cross-motion for summary judgment on the basis

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that Section Three of the Ordinance was preempted by 47
U.S.C. S 253. New Jersey Payphone v. Town of West New
York, 130 F.Supp.2d 631 (D.N.J. 2001). It specifically found
the grant of an exclusive franchise preempted by Section
4
253 and separately found the selection criteria used in
awarding such franchises also violated this section. In
addition to granting summary judgment, the District Court
permanently enjoined the Town from enforcing Section
Three of the Ordinance and the Franchise Notice, including
making any award of an exclusive franchise for providing
pay telephone service in the Town based on the amount of
compensation paid. Because the District Court found that
federal preemption fully resolved the dispute, it declined to
reach alternative constitutional and state law claims raised
by the Payphone Association. Preemption of Section Three
of the Ordinance and the Franchise Notice by Section 253
of the TCA is correspondingly the sole issue raised on appeal.2
_________________________________________________________________
2. Despite this fact, the concurrence would ground affirming the District
Court in state rather than federal law on the basis of the jurisprudential
principle that federal courts should generally not pass on constitutional
questions when non-constitutional grounds will dispose of a dispute. See
Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 345 (1936) (J.
Brandeis, concurring). While we certainly recognize the importance of
this canon, we disagree with its application in this case.
We have in the past noted that federal preemption is generally an issue
requiring the determination of congressional intent rather than resolving
a constitutional problem of substance. See United Services Auto. Assoc.
v. Muir, 792 F.2d 356, 363 (3d Cir. 1986). While Judge Alito, following
the Fourth Circuit’s approach in Bell Atlantic Maryland Inc. v. Prince
George’s County, 212 F.3d 863 (4th Cir. 2000), cites Supreme Court
dicta labeling whether state and federal laws conflict a "constitutional
question," Chicago & North Western Transportation Co. v. Kalo Brick &
Tile Co., 450 U.S. 311, 317 (1981), the Supreme Court, which has itself
on occasion considered preemption issues despite the presence of
unresolved and potentially dispositive state law issues, see Wisconsin
Public Intervenor v. Mortier, 501 U.S. 597, 604 (1991), has also
acknowledged that, "[t]he basic question involved in [preemption claims
under the Supremacy Clause] is never one of interpretation of the
Federal Constitution but inevitably one of comparing two statutes." Swift
& Co. v. Wickham, 382 U.S. 111, 120 (1965); see also Morales v. Trans
World Airlines, Inc. 504 U.S. 374, 383 (1992) ("[t]he question, at bottom,
is one of statutory intent"). For this reason, preemption questions are
"treated as ‘statutory’ for purposes of our practice of deciding statutory
claims first to avoid unnecessary constitutional adjudications." Douglas
v. Seacoast Products, Inc., 431 U.S. 265, 272 (1977). This is particularly
appropriate where preemption is of the express statutory variety and
Congress’ power to provide for such preemption is not in question.
5
II.

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A. Background Considerations
Section 253 of Title 47 of the United States Code provides
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 of this section,
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.
(c) State and local government authority
Nothing in this section affects the authority of a State
or local government to manage the public rights of way
or to require fair and reasonable compensation from
telecommunications providers, on a competitively
neutral and nondiscriminatory basis, for use of public
rights of way on a nondiscriminatory basis, if the
_________________________________________________________________
Moreover, the concurrence itself recognizes that concerns about
separation of powers, finality, and the paramount significance of
constitutional adjudication are not substantially implicated in this case.
While principles of federalism and comity are to some extent implicated,
we are not convinced that they are better served by ruling on a state law
issue intimately concerned with local budgeting and the apportionment
of powers between state and local governments than by interpreting a
federal statute that was expressly intended by Congress to preempt
certain types of local ordinances touching on issues within its power to
regulate. See Louisiana Power & Light Co. v. City of Thiboduax, 360 U.S.
25, 28 (1959) (citing Chicago v. Fieldcrest Dairies, Inc., 316 U.S. 168, 171
(1942)). Therefore, we see no reason to address the state law issues,
which have not been extensively briefed, in preference to the TCA claim
that is the focus of this appeal.
6
compensation required is publicly disclosed by such
government.
(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) of this section, the Commission
shall preempt the enforcement of such statute,
regulation, or legal requirement to the extent necessary
to correct such violation or inconsistency.

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Subpart (a) expressly preempts any state or local law
inconsistent with its prohibition. As indicated by their
opening text, subparts (b) and (c) are structurally savings
clauses, excepting the listed local and state functions from
the preemptive effect of subpart (a). Cablevision of Boston
Inc. v. Public Improvement Comm’n, 184 F3d 88, 98 (1st Cir.
1999). At the same time, the division between (b) and (c)
defines the boundaries of each body’s retained regulatory
authority, with states permitted to regulate broadly with
respect to public safety and other issues, and local
governments limited to powers delegated by their states and
management of their rights of way. In re TCI Cablevision, 12
F.C.C.R. 21,396, P 102-104, 109 (Sept. 19, 1997). In the
case of a dispute over a local regulation of rights of way,
once the party seeking preemption sustains its burden of
showing that a local municipality has violated Section
253(a) by formally or effectively prohibiting entry into the
payphone market, the burden of proving that the regulation
comes within the safe harbor in Section 253(c) falls on the
defendant municipality. In re Petition of the State of
Minnesota, 14 F.C.C.R. 21, 697, n.26 (1999).
This much is clear: Section 253 is quite inartfully drafted
and has created a fair amount of confusion. For this
reason, we briefly clear out some legal underbrush before
getting to the main issue.
In applying Section 253, one question with which courts
have struggled is whether there is a private right of action
to challenge ordinances as preempted by the section
directly in federal court. This issue is made confusing by
7
the structure of the section and the language of Section
253(d). To begin with, it is not clear from the text and
placement of subsection (d) whether Congress intended
preemption by the Federal Communications Commission
(the "FCC") to be the sole means of enforcing Sections 253
(a) and (b), or, if a private cause of action exists to enforce
either of these subsections. See Cablevision of Boston, 184
F.3d at 98. In the former case, (d)’s omission of (c) could be
read to mean that a private right of action addressed
directly to a federal court, instead of FCC jurisdiction, is
available solely to challenge local legislation purporting to
regulate rights of way and thereby potentially implicating
Section 253(c).3 This was the conclusion reached by the
Sixth and Eleventh Circuits, which, based primarily on
legislative history, found that it was the intent of Congress
to allow municipalities to defend themselves against
preemption suits locally rather than travel to Washington
D.C. to be heard before the FCC. TCG Detroit v. City of
Dearborn, 206 F.3d 618, 623 (6th Cir. 2000); BellSouth
Telecommunications, Inc. v. Town of Palm Beach, 252 F.3d
1169, 1189-91 (11th Cir. 2001); see also 141 Cong. Rec.
S8305-02 (June 14, 1995) (final text of S 253(d) designed to
leave rights-of-way issues to local federal courts and allow
the FCC to preempt "core" issues only.)

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While the opinion of the Eleventh Circuit in particular is
well reasoned, we need not decide whether to adopt it at
this time because resolution of this issue is not before us.
In ruling on summary judgment, the District Court found
that there is a private right of action implied in Section
253. 130 F.Supp.2d at 636. That ruling has not been
challenged on appeal. Therefore, for the purpose of this
case only, we assume that there is a private federal court
remedy for local rights-of-way ordinances that are
preempted by the TCA. The Supreme Court has held that
whether a federal statute creates a private claim for relief is
not a jurisdictional question. Northwest Airlines, Inc. v.
County of Kent, Michigan, 510 U.S. 355 (1994) (adjudicating
the claims raised by a private plaintiff on certiorari while
assuming a private right of action under the federal Anti-
_________________________________________________________________
3. The tension in this reading is that subsection (c) can not be "violated"
or separately enforced if it is merely a safe harbor.
8
Head Tax Act). Consequently, we are not required to
address the private right of action issue when it has not
been raised by the parties.
A second question with which courts have struggled is
the scope of preemption consistent with Section 253(c).
Confusion again arises because of inconsistencies within
the structure of the statute. Although Sections 253(b) and
(c) are framed as savings clauses, Section 253(d) speaks of
"violation" of (b) suggesting that it must impose some sort
of substantive limitation independent of (a). This also raises
the possibility that Section 253(c), which is similarly
phrased, contains a parallel limitation. The legislative
history of the TCA also gives some suggestion that
Congress, in enacting Section 253(c), may have intended to
create a separate enforceable requirement that municipal
acts be "competitively neutral and nondiscriminatory." See
141 Cong. Rec. H8460-01 (Aug. 4, 1995) (debate on current
language which was adopted to allow localities to retain
authority to set own fees so long as they were competitively
neutral).
While there is a circuit split on this issue,4 the facts of
the present case are such that there is again no need to
resolve it for the Third Circuit at this time. As discussed
below, the operation of Section 253(a) is sufficient to
preempt the Ordinance in this case and it does not fall
within the Section 253(c) safe harbor. We therefore limit
our ruling to preemption under Section 253(a).
_________________________________________________________________
4. The Sixth Circuit and a number of district courts have found that
Subsection (c) contains a separate limitation raising a cause of action.
See TCG Detroit, 206 F.3d 618, 623-24 (6th Cir. 2000), Bell Atlantic-Md.,
Inc. v. Prince George’s County, Md., 49 F.Supp.2d 805, 814 (D.Md. 1999)
(rev’d on other grounds, 212 F.3d 863 (4th Cir. 2000)); AT&T
Communications of the Southwest, Inc. v. City of Dallas, 8 F.Supp.2d

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582, 591 (N.D.Tex. 1998). The Eleventh Circuit has found that
subsection (a) contains the only substantive limitation. Town of Palm
Beach, 252 F.3d at 1169 1187-88. See also TCG New York Inc. v. City of
White Plains, N.Y., 125 F.Supp.2d 81, 87 (S.D.N.Y. 2000). The First
Circuit, while discussing the issue, has not resolved it. Cablevision of
Boston, 184 F.3d at 98-100.
9
B. Exclusivity
The Supremacy clause of the United States Constitution
invalidates state laws that "interfere with or are contrary to"
federal law. Gibbons v. Ogden, 22 U.S. 1, 211 (1824). When
acting on subjects within its constitutional power, Congress
is empowered to preempt state law in several ways,
including by expressly stating its intention to do so. Jones
v. Rath Packing Co., 430 U.S. 519, 525 (1977). In this case,
Section 253 expressly preempts state or local statutes,
regulations, or other requirements that prohibit or have the
effect of prohibiting market entry. 47 U.S.C. S 253(a).
In deciding whether the District Court correctly granted
summary judgment to the Payphone Association on the
issue of preemption, we review its legal determinations de
novo. Gritzer v. CBS Inc., 275 F.3d 291, 296 (3d Cir. 2002).
We begin, as did the District Court, with the exclusive
nature of the franchises that Section Three of the
Ordinance and the Franchise Notice would create. We find
that the exclusivity of the franchises that the Town would
grant violates Section 253(a). There can be no question that
designating a single company as authorized to provide
payphones in the public rights of way in a large
geographical area which currently is served by multiple
companies, and which is capable of accommodating at least
75-100 separate telephones, reduces competition and
constitutes a barrier to entry. The deliberate creation of
scarcity by the Town in this case is directly at odds with
the letter and spirit of the TCA. The District Court correctly
noted that, "it is well-recognized that the [TCA] marked a
sea change in the regulation of the telephone industry in
which Congress rejected the long-held premise that
monopolies were necessary to reliable and universal
service." 134 F.Supp.2d at 636 (quoting Cablevision, 184
F.3d at 97). Because Section Three of the Ordinance would
act to recreate just such monopolies, it is preempted. See
also 47 U.S.C. S 276 (directing the FCC to establish rules to
promote competition among payphone service providers.)
The Town nevertheless protests that the Ordinance is not
preempted because the auction process it wishes to use is
itself competitive. It also argues that the Ordinance does
not create a substantial burden on competition because
10
other providers may still compete to place pay telephones
on private property near to the public rights of way. We find

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both of these arguments unconvincing. A bidding
competition where the winner is determined by willingness
to share a monopoly profit with the Town is clearly not the
kind of competition intended by the TCA. Even if an
exclusive franchise were awarded solely on the basis of the
nominal cost of services to the consumer, an auction run
under such a rule would still be a highly imperfect
substitute for actual market competition. In either case, the
effect of such an ordinance is still to prohibit losing entities
as a matter of law from competing for private customers, a
violation of the plain language of Section 253(a).
As to placing pay telephones on private property, the
Town provides no evidence for the inherently implausible
proposition that such installations would allow other
providers to fully compete for the patronage of people
requiring use of a payphone while travelling or otherwise
located in public places. In economic parlance, payphones
on private property would, for various reasons such as the
inconvenience of travelling to such phones or their lack of
visibility from the rights of way, be imperfect substitutes for
phones actually in the rights of way. The availability of
competition from such locations thus does not save the
Ordinance from the prohibitions of Section 253(a).
The Town also claims that Section Three of the
Ordinance is protected by Section 253(c). It claims that the
Ordinance is within the safe harbor because its purpose is
to ensure the orderly flow of traffic unimpeded by the
random placement of public payphones in unsafe locations
as well as to prevent such telephones from becoming the
focal points of various criminal activities and ensure that
they are adequately maintained. It thus claims that it is
properly an exercise of its reserved power to manage the
public rights of way.
While we are extremely skeptical about the proposition
that managing traffic patterns and crime requires an
exclusive franchise, we do not deny that there may be a
rational relationship between the two. The purchasing
agent’s candid admission that the amount of compensation
offered to the Town was the primary criterion in selecting
11
the winning bid certainly suggests that preserving
the safety of the rights of way was not the real or
primary purpose of the Ordinance. It has obvious use as a
tool for revenue generation and regulation of the
telecommunications services provided to the public.
However, it is at least plausible that the Ordinance could
ease the burden of policing the rights of way by limiting the
number of providers of payphones that the Town would be
required to monitor to one. Under conditions of limited
resources, such a reduction in the cost of monitoring could
possibly have a material bearing on the Town’s ability to
police the placement and maintenance of payphones. 5
Thus, although other courts have been willing to strike
down local legal requirements that are only tenuously

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linked to rights-of-way management, see City of Auburn v.
Qwest Corp., 260 F.3d 1160, 1178-79 (9th Cir. 2001),
(financial reporting requirements and regulations on
ownership related to fitness and stability of service
providers struck down as "more than necessary" to manage
rights of way and on the basis that permitting them on
such a tenuous connection would leave no limiting
principle on S 253(c)); City of White Plains, 125 F.Supp.2d
at 1309 (reporting and inspection requirements are outside
the scope of "reasonable" regulations of the rights of way),
or that merely act as conditions on access to rights of way
as a "hook" to achieve other regulatory purposes, see
BellSouth Telecommunications v. City of Coral Springs, 42
F.Supp.2d 1304, 1309 (S.D.Fla. 1999) rev’d in part on other
grounds (excluding reporting requirements, financial,
technical and legal qualifications); Town Of Palm Beach, 127
F.Supp.2d at 1355, we will assume that the Ordinance
_________________________________________________________________
5. We hasten to note that the facts presented by the Town do not
demonstrate an inability to police the rights of way under current
conditions. Indeed, an affidavit provided by the Deputy Director of the
Town’s police force certified that the Town had previously suffered from
a proliferation of unlicenced payphones, but indicated that efforts to
curtail the problem through traditional methods had met with a
substantial measure of success. (J.A. at 132-136, certification of Joseph
Pelligio). Nevertheless, the Ordinance is rationally related to management
of the public rights of way in that it may reduce the cost of such
policing.
12
qualifies as "manage[ment of] the public rights of way" for
the purposes of Section 253(c).
However, this does not end the inquiry as the scope of
the Section 253(c) safe harbor is limited by its use of the
terms "competitively neutral" and "nondiscriminatory." The
use of these terms in the section is not immediately obvious
but rather poses something of an interpretive challenge of
its own. The FCC reads them as straightforward limits on
both the power to manage the rights of ways reserved for
local governments in general and their freedom to impose
fees for use of the rights of way. See In re Classic
Telephone, Inc., 11 F.C.C.R. 13,083 P 39; TCI Cablevision,
12 F.C.C.R. 21,396, P 108; In re State of Minnesota, 14
F.C.C.R. 21,697 P 61. The majority of courts that have
ruled on this issue have also followed the lead of the FCC
without comment. See City of Dallas, 8 F.Supp.2d at 593;
TCG Detroit v. City of Dearborn, 977 F.Supp 836, 840-41
(E.D.Mich. 1997) aff ’d 206 F.3d. 618 (6th Cir. 2000). The
First Circuit, however, has questioned this reading,
reasoning that as a matter of syntax, the phrase"on a
competitively neutral and nondiscriminatory basis" as it
appears in the middle of Section 253(c) can only modify the
phrase "to require fair and reasonable compensation"
immediately preceding it in the text and not "to manage the
public rights of way." Cablevision of Boston 184 F.3d at
100-101. On its reading, the phrase "for use of public

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rights-of-way" following "on a competitively neutral and
nondiscriminatory basis" must as a matter of logic modify
"compensation," thereby trapping "on a competitively
neutral and nondiscriminatory basis" on the same
grammatical level as itself. In other words, the First Circuit
reasons that the relevant phrase is followed by text making
it part of a subordinate clause that only makes sense as a
condition on compensation requirements.6
_________________________________________________________________
6. Nevertheless, without deciding the issue, the First Circuit also noted
that an examination of the context of a statutory section can sometimes
lead courts to decide "that a linguistically implausible interpretation best
reflects the legislature’s intent." Id. at 101. It reasoned that Congress
likely intended "on a competitively neutral and nondiscriminatory basis"
to apply to Section 253(c) as a whole, since both management of rights
of way and compensation schemes could equally interfere with the TCA’s
goal of open competition among telecommunication providers. Id.
13
Our own appraisal of the text of Section 253(c) read in
isolation is that the function of "on a competitively neutral
and nondiscriminatory basis" is ambiguous. While the
reading of the First Circuit is most consistent with the
syntax to which it points, it is also possible to read the
relevant phrase as limiting both the power to manage the
rights of way in general and to demand compensation.
Although such a reading is awkward, it is, unfortunately,
not significantly more so than the available alternatives
because Section 253(c) is simply not well drafted. It is,
rather, written in such a way as to make problems of
syntax unavoidable regardless of the reading.
For example, immediately following the language already
cited above, Section 253(c) uses the phrase "for use of
public rights of way on an nondiscriminatory basis." A
natural reading of that phrase might suggest that it means
that telecommunications providers must use the public
rights of way in a non-discriminatory manner. However,
such a reading--odd on it own terms--is nonsensical in
context, because this phrase is located in a safe harbor that
preserves powers for state and local governments and does
not deal with regulation of service providers themselves.
This second use of the term "nondiscriminatory" may
therefore be meant to signify that compensation
requirements and perhaps general rights-of-way
management are to be nondiscriminatory. But if so, the
term is at least partially duplicative of the same term used
in the previous phrase. We are thus forced to choose
between illogical uses of the term "nondiscriminatory."
In trying to ferret out the intention of Congress, we
therefore conclude that it would not be proper to place too
much interpretive weight on the niceties of the syntax of
Section 253(c), given the inconsistencies of the section as a
whole. The most that we can safely conclude looking at the
text of this section in isolation is that there are multiple
readings possible, several of which require rights-of-way

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management to be at least nondiscriminatory and others of
which require it to be both nondiscriminatory and
competitively neutral.
However, in looking for the meaning of this statutory
language, we must look to the statutory context in which
14
that language is used and the broader context of the
statute as a whole as well as the language itself. See Estate
of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 477 (1992);
McCarthy v. Bronson, 500 U.S. 136, 139 (1991); Rosenberg
v. XM Ventures, 274 F.3d 137, 141-42 (3d. Cir. 2001). In
this instance, the statutory framework indicates that
Congress intended permissible management of the rights of
way to be limited to those local statutes or regulations that
are nondiscriminatory and competitively neutral. A reading
of Section 253(c) placing no limit on management of public
rights of way outside of compensation requirements would
be demonstrably at odds with the Congressional intent
expressed in Section 253(a) to foster competition. We can
find no reasonable basis in light of the overarching scheme
of the TCA to conclude that Congress intended to reserve
for the states and localities the power to discriminate
against certain telecommunications service providers in
regulating rights of way while otherwise generally
preempting local laws burdening market entry. Rather, a
more reasonable reading of the section in context is that
Congress simply intended to preserve local power to
regulate the public rights of way for purposes unrelated to
the competition to provide telecommunications services to
the public and in a manner consistent with that
competition.
Further evidence that the contrary could not have been
Congress’ intent is found in Section 253(b). This section,
which is largely parallel to Section 253(c), includes the
general requirement that state regulation be"on a
competitively neutral basis," indicating that Congress
understood quite well that a broader carve-out of state
authority would permit states to use the areas in which
their regulatory authority was preserved to undermine the
competitive framework established by the TCA as a whole.
In this context, it would make no sense for regulation of the
rights of ways, access to which is critical to the ability of
service providers to reach potential customers, to be
exempted from a requirement that is otherwise generally
applied to state law protecting public safety and welfare.
Section 253(b) demonstrates the balance Congress chose as
necessary to effectuate its intent to enhance competition
and eliminate local monopolies while leaving room for
15
reasonable regulation of issues of particular state and local
concern.

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Thus, in looking at the statutory language in context, we
find that the more logical reading of Section 253(c) requires
management of public rights of way to be competitively
neutral and nondiscriminatory. Nevertheless, since Section
253(c) is facially ambiguous, we also look to the legislative
history. While most of the Congressional discussion of
Section 253 was on subjects tangential to those of concern
here, see e.g., 141 Cong. Rec. H8460-01 (August 4, 1995)
(statements by Congressmen Stupak and Barton),7 such
commentary as is available touching on this issue support
this reading. For example, the report of the conference
committee reconciling the House and Senate versions of the
TCA notes "the authority of a local government to manage
its public rights-of-way in a nondiscriminatory and
competitively neutral manner" in several places. S. Rep.
104-230, *178, *179, *180 (February 1, 1996). During floor
debate of an amendment brought by Senator Feinstein to
eliminate a prior version of Section 253(d) giving the FCC
authority to preempt municipal rights-of-way regulations,
Senator Hollings described the history of the section as
follows:
Section [253] is the removal of the barriers to entry,
and that is exactly the intent of the Congress. . . .
What we are trying to do is say, now, let the games
begin, and we do not want the States and the local
folks prohibiting or having any effect of prohibiting the
ability of any entity to enter interstate or intrastate
_________________________________________________________________
7. Section 253(c) began life as the Stupak-Barton amendment in the
House of Representatives (identical language was inserted into the
Senate version of the TCA in committee by Senator Hutchison). The
amendment was written to replace Representative Dan Schaefer’s "parity
provision" which would have required that any fees imposed upon a
telecommunications provider for use of the public rights of way would
have to have been exactly equal regardless of the extent to which any
particular provider would impose upon local resources or other users of
the rights of way. See 141 Cong. Rec. H 8427 (August 4, 1995). The
authors’ comments accompanying the introduction of their amendment
were primarily concerned with providing local governments with the
flexibility to vary charges based on the use of the rights of way.
16
telecommunications services. When we provided that,
the States necessarily came and said . . . we have the
responsibilities over the public safety and welfare.. . .
So what about that? . . . So we said, well, right to the
point: "Nothing in this section shall affect the ability of
a State to impose on a competitively neutral basis"--
those are the key words there. . . .
The mayors came . . . and they said we have our
rights of way and we have to control--and every mayor
must control the rights of way. So then we wrote in
there: Nothing shall affect the authority of a local
government to manage the public rights of way or to

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acquire fair and reasonable compensation on a
competitively neutral and nondiscriminatory basis.
"Competitively neutral and nondiscriminatory basis."
Then we said finally, indeed, if they do not do it on a
competitively neutral or nondiscriminatory basis, we
want the FCC to come in there in an injunction.
141 Cong. Rec. S8134-01, *S8174 (June 12, 1995).
Similarly, one of the authors of Section 253(c) noted that it
"does not let the city governments prohibit entry of
telecommunications service providers for pass through or
for providing service to their community." 141 Cong. Rec.
H460-01, *8460 (August 4, 1995) (statement of
Congressman Barton). Finally, those statements on the
floor of the House of Representatives that touched on the
issue during debate on the Conference Report to
accompany the TCA also reflected the understanding that
municipalities were to be limited to nondiscriminatory
and competitively neutral rights of way management.
142 Cong. Rec. H1145, *H1150, *H1173 (February 1, 1996)
(statements of Congressman Goss and Congresswoman
Pelosi).
Though somewhat cursory, this evidence of legislative
intent supports the reading of Section 253(c) adopted by
the FCC and other jurisdictions. In combination with this
legislative history, the context provided by the other parts
of Section 253 and the structure of the statute as a whole
persuades us that the "competitively neutral and
17
nondiscriminatory" requirement applies to management of
the rights of way as well as compensation.
In deciding whether the Ordinance is protected under
Section 253(c) we must thus determine whether it is
competitively neutral and nondiscriminatory. We find that it
is not. The Ordinance is facially discriminatory in that it
permits the Town to choose one service provider allowed to
provide pay telephone service to the public to the exclusion
of all others based on criteria determined by it rather than
the market. The Town may, of course, make distinctions
that result in the de facto application of different rules to
different service providers so long as the distinctions are
based on valid considerations. It can, for example, have
different policies for companies wishing to dig up the
streets in order to lay new conduit, from those who wish to
convert existing conduit and do not need to dig up the
streets. What it cannot do is what it has tried to do: create
a set of rules the purpose of which is to select one company
over others for preferential treatment.
The attempt to create zones of exclusive franchise also
fails the test of competitive neutrality. Bidders are required
according to Section Three and the Franchise Notice to
compete for service of two zones requiring a minimum of
75-100 payphones. As an integral part of that requirement

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they must demonstrate the ability to service such zones
and are also required to pay a deposit tied to the number
of payphones they will install. The Ordinance thus favors
larger companies with the resources to service the zones as
defined by the Town. The Town cannot, consistent with the
requirement to be competitively neutral, force companies
into a competition the terms of which favor larger
telecommunications companies with the resources to meet
such demands over smaller competitors who may not have
similar resources.
Because Section Three of the Ordinance sets up an
exclusive franchise that is inherently discriminatory and
creates competitive inequalities, it is not protected by
Section 253(c).
C. Selection Criteria
In addition to the creation of an exclusive franchise itself,
the District Court also evaluated the selection criteria
18
specified in the Franchise Notice for their consistency with
Section 253. However, such an evaluation is not necessary
in this case, since we have already found that the attempt
to set up an exclusive franchise is itself preempted by
Section 253(a) and not saved by Section 253(c). We
therefore decline to rule separately on whether the use of
such criteria would be permissible. We do note, however,
that several of the criteria which the Town would apply
have been rejected in connection with non-exclusive
franchise schemes considered by other jurisdictions. See
City of Auburn, 260 F.3d at 1178; City of White Plains, 125
F.Supp.2d at 91-93; City of Dallas, 8 F.Supp.2d at 592-94;
City of Coral Springs, 42 F.Supp.2d at 1310.
CONCLUSION
For the foregoing reasons, the District Court’s Order
Granting the Payphone Association’s Motion for Summary
Judgment and denying the Town’s Cross-Motion for
Summary Judgment is AFFIRMED.
19
ALITO, Circuit Judge, concurring in the judgment:
This case involves a challenge under federal and state
law to a local ordinance regulating the use of public rights-
of-way by payphone service providers. The majority bases
its decision on federal law, holding that the ordinance is
invalid because it is preempted by the Federal
Telecommunications Act of 1996. While I agree that the
ordinance in question is invalid, I arrive at this conclusion
for different reasons.
It is well established that, when possible, federal courts

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should generally base their decisions on non-constitutional
rather than constitutional grounds. See Harmon v. Brucker,
355 U.S. 579, 581 (1958) ("In keeping with our duty to
avoid deciding constitutional questions presented unless
essential to proper disposition of a case, we look first to
petitioners’ nonconstitutional claim that respondent acted
in excess of powers granted him by Congress."); Ashwander
v. TVA, 297 U.S. 288, 347 (1936) (Brandeis, J., concurring)
("The Court will not pass upon a constitutional question
although properly presented by the record, if there is also
present some other ground upon which the case may be
disposed of."); United States v. Serafini, 167 F.3d 812, 815
n.7 (3d Cir. 1999) ("Longstanding practice calls for federal
judges to explore all non-constitutional grounds of decision
before addressing constitutional ones." (quoting United
States v. Bloom, 149 F.3d 649, 653 (7th Cir. 1998)). Indeed,
reaching constitutional issues in advance of non-
constitutional ones may be reversible error. See, e.g., Crane
v. Indiana High School Athletic Association, 975 F.2d 1315,
1319 (7th Cir. 1992) (citing Schmidt v. Oakland Unified
School District, 457 U.S. 594, 595 (1982)); WJW-TV, Inc. v.
City of Cleveland, 878 F.2d 906, 910 n.4 (6th Cir. 1989);
Beeson v. Hudson, 630 F.2d 622, 627 (8th Cir. 1980).
In Bell Atlantic-Maryland, Inc. v. Prince George’s County,
Maryland, 49 F. Supp. 2d 805 (D. Md. 1999), a case very
similar to the one now before us, the district court held
that the Federal Telecommunications Act preempted a local
ordinance that regulated the use of county-owned rights-of-
way by telecommunications companies doing business in
the county. The district court did not address the state-law
issues raised. On appeal, the Fourth Circuit held that the
20
district court had committed reversible error by deciding
the constitutional question of preemption before
considering the state-law questions upon which the case
might have been decided. See Bell Atlantic Maryland, Inc. v.
Prince George’s County, Maryland, 212 F.3d 863 (4th Cir.
2000). The Fourth Circuit reasoned as follows: (1) courts
should avoid deciding constitutional questions unless they
are essential to the disposition of a case; (2) determining
whether a federal statute preempts a state statute is a
constitutional question implicating the Supremacy Clause;
(3) disposition of the state-law questions raised by Bell
Atlantic could have disposed of the case; (4) therefore, the
district court committed reversible error by deciding the
constitutional question of preemption before considering
the state-law questions. See id. at 865-66. The Fourth
Circuit reiterated this reasoning in MediaOne Group, Inc. v.
County of Henrico, Virginia, 257 F.3d 356 (4th Cir. 2001),
and the Eleventh Circuit took a similar approach in
BellSouth Telecommunications, Inc. v. Town of Palm Beach,
252 F.3d 1169 (11th Cir. 2001).
The majority opinion addresses the preemption question
first and does not reach the state-law arguments. The
District Court acknowledged the Fourth Circuit decision in

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Bell Atlantic-Maryland, but disagreed with its approach.
New Jersey Payphone Association Inc. v. Town of West New
York, 130 F. Supp. 2d 631, 634 (D.N.J. 2001). The District
Court reasoned that it was appropriate to address the
preemption issue first because preemption is a
constitutional issue only in the indirect sense that the
authority for preemption rests on the Supremacy Clause.
See id. at 634-35.
It is clear, however, that preemption is a constitutional
issue. See Chicago & North Western Transportation Co. v.
Kalo Brick & Tile Co., 450 U.S. 311, 317 (1981)
("[Determining whether a statute is preempted by federal
law] ‘is essentially a two-step process of first ascertaining
the construction of the two statutes and then determining
the constitutional question whether they are in conflict.’ ")
(quoting Perez v. Campbell, 402 U.S. 637, 644 (1971)).
The rationales behind the doctrine of avoiding
constitutional questions except as a last resort are
21
grounded in fundamental constitutional principles--the
"great gravity and delicacy" of judicial review, separation of
powers, the paramount importance of constitutional
adjudication, the case or controversy requirement, and
principles of federalism. See Rescue Army v. Municipal
Court of Los Angeles, 331 U.S. 549, 571 (1947);
Ashwander, 297 U.S. at 345-46 (Brandeis, J., concurring).
In this case, two factors mitigate the applicability of these
principles: (1) we are striking down a local ordinance, not
a federal law, and (2) the basis for doing so is preemption
by federal statute, not direct violation of the federal
Constitution. The former factor reduces the significance of
concerns about separation of powers and the finality of
judicial review because we are not invalidating an act of
Congress, and our interpretation of the statutes at issue
does not foreclose a response by the state or federal
legislature. The latter factor diminishes the relevance of the
paramount importance of constitutional adjudication as it
applies to this case because we are not engaging in
constitutional interpretation or declaring constitutional
rights.
Nevertheless, the limitation on Article III courts to
adjudication of actual cases or controversies counsels us to
dispose of cases on the narrowest possible ground, which
in this case is the state-law ground. Indeed, this seems to
be the basis for Justice Brandeis’s prudential rules
regarding constitutional adjudication as set forth in his
Ashwander concurrence. 297 U.S. at 345-47 (Brandeis, J.,
concurring). Moreover, the federalism rationale is pertinent
here because we have the option of avoiding invocation of
federal supremacy over local laws. Therefore, resolving this
case on state-law grounds does less violence to principles of
federalism and dual sovereignty. In sum, the principles
underlying the prudential rules set forth in Ashwander are
sufficiently applicable here as to counsel that we begin our

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analysis of this case with the state-law claim.
On the state-law claim, it is clear that the Ordinance
violates N.J. Stat S 54:30-124(a), which prohibits a
municipality from imposing any fees or assessments"in the
nature of a local franchise" against telecommunication
companies. It is well established in New Jersey law that a
22
municipality may not raise revenue beyond what is required
to meet regulatory expenses. See, e.g., Taxi’s Inc. v. Borough
of East Rutherford, 373 A.2d 717, 723 (N.J. Super. Ct. Law
Div. 1977) ("A municipality may not, under the enabling
legislation, pass a valid ordinance for revenue purposes
only, but it may exact a fee commensurate with the cost of
regulation and even in excess thereof if within reasonable
limits." (citations omitted)). West New York offers no
contrary arguments on the state-law issues. Indeed, the
only argument that could conceivably be made by the Town
in support of the Ordinance is that its revenue-raising is
"within reasonable limits." See, e.g., Gilbert v. Town of
Irvington, 120 A.2d 114, 117 (N.J. 1956) (holding that a
municipality lacks general revenue-raising power, but that
it may collect license fees "which may, at least within
reasonable limits, exceed the regulatory costs"). This is not
a plausible claim in this case, however, because the fees in
the Ordinance are tied explicitly to the revenue generated
by the payphone service provider. That is, the municipality
will earn a proportion of the profits, and therefore, the fee
scheme cannot honestly be considered to be an attempt to
defray regulatory expenses. Thus, the Ordinance is in
violation of N.J. Stat S 54:30-124(a).
Accordingly, I concur in the judgment, but for reasons
grounded in state law rather than federal law.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
23

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