Assurance Wireless USA, L.P. v. Alice Reynolds

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ASSURANCE WIRELESS USA, No. 23-15490

L.P.; METROPCS CALIFORNIA,

LLC; SPRINT SPECTRUM LLC; T- D.C. No. 3:23-cv-

MOBILE USA, INC.; T-MOBILE 00483-LB

WEST LLC,

Plaintiffs-Appellants, OPINION

v.

ALICE B. REYNOLDS, President of

the California Public Utilities

Commission, in her official capacity;

KAREN DOUGLAS, Commissioner

of the California Public Utilities

Commission, in her official capacity;

DARCIE L. HOUCK, Commissioner

of the California Public Utilities

Commission, in her official capacity;

JOHN REYNOLDS, Commissioner of

the California Public Utilities

Commission, in his official capacity;

GENEVIEVE SHIROMA,

Commissioner of the California Public

Utilities Commission, in her official

capacity,

Defendants-Appellees.

2 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

Appeal from the United States District Court

for the Northern District of California

Laurel D. Beeler, Magistrate Judge, Presiding

Argued and Submitted October 17, 2023

San Francisco, California

Filed April 26, 2024

Before: Eugene E. Siler, * Jacqueline H. Nguyen, and Ryan

D. Nelson, Circuit Judges.

Opinion by Judge R. Nelson

SUMMARY **

Telecommunications Act

The panel affirmed the district court’s order declining to

preliminarily enjoin a California Public Utilities

Commission rule changing the mechanism for charging

telecommunications providers to fund California’s universal

service program.

The Telecommunications Act requires providers of

interstate telecommunications services to “contribute, on an

equitable and nondiscriminatory basis, to the specific,

*

The Honorable Eugene E. Siler, United States Circuit Judge for the U.S.

Court of Appeals for the Sixth Circuit, sitting by designation.

**

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 3

predictable, and sufficient mechanisms established by the

Federal Communications Commission to preserve and

advance universal service.” The FCC has interpreted the

“equitable and nondiscriminatory” requirement to require

“competitive neutrality.” Under 47 U.S.C. § 254(f), the Act

places similar requirements on carriers that provide

intrastate services, but, subject to consistency with federal

law and competitive neutrality, it gives states the discretion

to decide the “manner” that will ensure “the preservation and

advancement of universal service in that State.”

Until recently, universal service in California was funded

based on revenue. Faced with declining revenues, CPUC

issued a rule imposing surcharges on telecommunications

carriers based not on revenue but on the number of active

accounts, called access lines. The carriers sought a

preliminary injunction of the access line rule as expressly

preempted by § 254(f).

The panel held that the district court properly exercised

its discretion in denying preliminary injunctive relief

because the carriers were unlikely to succeed on the merits

of their express preemption claims. The panel held that

§ 254(f) preempts state regulations that are “inconsistent

with” FCC regulations and that are not “equitable and

nondiscriminatory.” The carriers did not show a likelihood

of success on their claim that the access rule was

"inconsistent with” the FCC rule because, while the access

line rule differed from the FCC’s rule funding interstate

universal service programs, the carriers did not show that the

access line rule burdened those programs. The panel also

rejected the carriers’s likelihood of success on their claim

that the access line rule was preempted because it was

inequitable and discriminatory contrary to § 254(f).

4 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

COUNSEL

Peter Karanjia (argued), DLA Piper LLP (US), Washington,

D.C.; Ben C. Fabens-Lassen and Gaspard Rappoport, DLA

Piper LLP (US), Los Angeles, California; Kathleen S. Kizer,

DLA Piper LLP (US), San Francisco, California; for

Plaintiffs-Appellants.

Hien Vo Winter (argued), California Public Utilities

Commission, Legal Division, Sacramento, California;

Vanessa Baldwin, David W. Fermino, Jonathan C. Koltz,

Christine J. Hammond, and Ian Culver, California Public

Utilities Commission, Legal Division, San Francisco,

California, for Defendants-Appellees.

Eric S. Tresh and Alla Raykin, Eversheds Sutherland (US)

LLP, Atlanta, Georgia, for Amici Curiae Multicultural

Media, Telecom, and Internet Council, ALLvanza, the

California Hawaii State Conference of the National

Association for the Advancement of Colored People, and

LatinoJustice PRLDEF.

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 5

OPINION

R. NELSON, Circuit Judge:

Federal law requires both the Federal Communications

Commission and the states to charge telecommunications

providers to fund universal service programs. Facing

declining revenues under its prior funding mechanism,

California enacted a new rule charging per access line to

advance its own universal service program. A group of

carriers claim that the new rule is preempted as “inconsistent

with” federal law, which charges by revenue. The district

court declined to enjoin the California rule. We affirm.

I

Congress enacted the Communications Act of 1934 to

“make available, so far as possible, to all the people of the

United States . . . a rapid, efficient, Nation-wide, and world-

wide wire and radio communication service with adequate

facilities at reasonable charges.” 47 U.S.C. § 151. This is

known as universal service. In 1996, Congress enacted the

Telecommunications Act, which amended the

Communications Act. Under the Telecommunications Act,

“[e]very telecommunications carrier that provides interstate

telecommunications services shall contribute, on an

equitable and nondiscriminatory basis, to the specific,

predictable, and sufficient mechanisms established by the

[FCC] to preserve and advance universal service.” Id.

§ 254(d).

The Telecommunications Act places similar

requirements on telecommunications carriers that provide

intrastate services. But it does not tell the states how to

achieve that goal. Instead, it leaves to the states the right “to

6 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

adopt regulations not inconsistent with the [FCC]’s rules

[that] preserve and advance universal service” on an

“equitable and nondiscriminatory basis.” Id. § 254(f). The

FCC has interpreted the “equitable and nondiscriminatory”

requirement to require “competitive neutrality.” Matter of

Universal Serv. Contribution Methodology: A Nat’l

Broadband Plan for Our Future, 27 FCC Rcd. 5357,

5373, ¶ 10 (2012). Competitive neutrality, in turn, requires

universal service rules (1) to “neither unfairly advantage nor

disadvantage one provider over another” and (2) to “neither

unfairly favor nor disfavor one technology over another.”

Id. at 5361.

Subject to those two narrow limitations—consistency

with federal law and competitive neutrality—the

Telecommunications Act gives states, not the FCC, the

discretion to decide the “manner” which will ensure “the

preservation and advancement of universal service in that

State.” 47 U.S.C. § 254(f). Through this “system of

cooperative federalism,” Congress recognized states as “key

partners to the federal government in regulating the

telecommunications industry.” MetroPCS Cal., LLC v.

Picker, 970 F.3d 1106, 1118 (9th Cir. 2020) (quotations

omitted). Guided by this recognition, Congress “called upon

[the states] to apply their expertise and judgment” to advance

intrastate universal service and gave them “freedom to do

so.” Id. at 1118–19 (cleaned up).

To follow § 254, the FCC established a “universal

service fund” to subsidize universal service. 47 C.F.R. Part

54. As § 254(f) allows, “California requires its own

universal service contributions.” Picker, 970 F.3d at 1109.

Its California Public Utility Commission (CPUC) issues

rules to determine how such contributions are to be

calculated. Id. at 1109–10. Until recently, universal service

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 7

in California was funded based on revenue. Id. Revenue, in

turn, was calculated using rules requiring “all prepaid

providers to apply a uniform, flat rate” equation “to

determine their intrastate revenues.” Id. at 1110. Postpaid

services “were free to use any of the three FCC-recognized

methods to determine their intrastate revenues for purposes

of calculating surcharges owed to the CPUC.” Id. CPUC

faced a problem as funding universal service using a revenue

system proved unsustainable. As time passed, the base of

chargeable surcharges—which largely comprised

landlines—declined. 1

Faced with declining revenues inadequate to support

CPUC’s universal service programs, CPUC considered other

options for funding the federally mandated universal service

programs. It landed on a rule that imposed surcharges on

telecommunications carriers based not on revenue but on the

number of active accounts, called access lines. An access

line is:

[A] wire or wireless connection that provides

a real time two way voice

telecommunications service or [voice over

internet protocol] service to or from any

device utilized by an end user, regardless of

technology, which is associated with a 10-

digit NPA-NXX number or other unique

identifier and a service address or Place of

Primary Use in California.

Assurance Wireless USA, L.P. v. Reynolds, No. 23-CV-

00483-LB, 2023 WL 2780365, at *3 (N.D. Cal. Mar. 31,

1

Between 2012 and 2020, the “intrastate revenue billing base” decreased

by fifty-eight percent, from $15.4 billion to $6.433 billion.

8 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

2023). Under the new rule, all carriers apply an objective

standard to “count and report access lines” to ensure that “all

end users (residential, small business, large business) and all

service types will pay the same amount.” Id. (cleaned up).

By design, this standard was “more sustainable, technology

neutral, unambiguous, and equitable” than the prior system

under which the “disproportionate burden” fell on landline

users. Id. (internal quotations omitted).

Plaintiff carriers sued, unsuccessfully seeking a

preliminary injunction of the access line rule as expressly

preempted by § 254(f)’s text. The district court concluded

that the “new rule is different from the FCC rule, but the

plaintiffs did not establish that it is inconsistent and

preempted.” Assurance Wireless USA, L.P., 2023 WL

2780365, at *6. It rejected the carriers’s claim that, because

the FCC had declined to adopt a connection-based approach

to fund the federal universal service program, states needed

to do the same. Id. at *6–7. It also spurned the carriers’s

attempts to “evoke[] conflict preemption” despite “argu[ing]

only express preemption.” Id. at *7.

The district court also concluded that the new rule is both

equitable and nondiscriminatory. Id. at *7–9. It explained

that “end users, not carriers, pay the surcharges.” Id. at *9.

And it concluded that it was not unfair because all carriers

were subject to the rule. Id. The court also rejected attempts

from the carriers to find unfair discrimination in CPUC’s

decision to subsidize providers of services to low-income

wireless users that participate in California’s LifeLine

Program but not those who provide services to low-income

recipients of subsidies under the FCC’s Affordable

Connectivity Program (ACP). Id. Unlike the ACP, the

LifeLine Program “applies to only one member” of a

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 9

household. Id. This difference rendered the two programs

“materially distinct.” Id.

Although the district court concluded that the carriers’s

preemption arguments were unlikely to succeed on the

merits, it also decided the other preliminary injunction

factors. It found the question of irreparable harm close

because the carriers could not get damages from the state and

would lose customer goodwill if they tried to pass to their

customers the new charges from the new rule. Id. at *10. It

found that the merged public interest and the balance of

equities factors did not favor an injunction because CPUC

was trying to save its universal service program with the

access line rule. Id. at *11.

II

“Denial of a motion for a preliminary injunction is

reviewed for abuse of discretion and the underlying legal

principles de novo.” Int’l Franchise Ass’n, Inc. v. City of

Seattle, 803 F.3d 389, 398 (9th Cir. 2015). To qualify for an

injunction, the moving party must establish a likelihood of

success on the merits, that it will suffer irreparable harm in

the absence of injunctive relief, that the balance of the

equities tips in its favor, and that the public interest supports

relief. All. for the Wild Rockies v. Petrick, 68 F.4th 475, 490

(9th Cir. 2023). As to the merits, our cases apply a “sliding

scale test” that “permits plaintiffs to satisfy this requirement

with a ‘serious question’ on the merits when the balance of

hardships tips sharply in their favor.” Where Do We Go

Berkeley v. California Dep’t of Transp., 32 F.4th 852, 863

(9th Cir. 2022). Serious questions are issues that “cannot be

resolved one way or the other at the hearing on the injunction

because they require more deliberative investigation.”

Manrique v. Kolc, 65 F.4th 1037, 1041 (9th Cir. 2023)

10 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

(cleaned up). Thus, parties do not show serious questions

when they raise a “merely plausible claim,” nor can a district

court “forgo legal analysis just because it has not identified

precedent that places the question beyond debate.” Where

Do We Go Berkeley, 32 F.4th at 863. This “less demanding”

merits standard requires serious factual questions that need

to be resolved in the case. All. for the Wild Rockies, 68 F.4th

at 497. 2 The final two injunction factors—the balance of

equities and the public interest—merge where a government

agency is a party. Nken v. Holder, 556 U.S. 418, 435 (2009).

III

We conclude that the carriers are unlikely to succeed on

the merits of their claims. And “if a movant fails to meet

this threshold inquiry, we need not consider the other

factors.” California v. Azar, 911 F.3d 558, 575 (9th Cir.

2018) (internal quotations omitted).

A

We begin with a word on preemption. Federal

regulations can preempt state law. Fid. Fed. Sav. & Loan

Ass’n v. de la Cuesta, 458 U.S. 141, 152–53 (1982). We

recognize three types of preemption: “express preemption,

field preemption, and conflict preemption.” Ass’n des

Éleveurs de Canards et d’Oies du Quebec v. Bonta, 33 F.4th

1107, 1113–14 (9th Cir. 2022). Express preemption “arises

‘when the text of a federal statute explicitly manifests

Congress’s intent to displace state law.’” Id. at 1114

(quoting Valle del Sol Inc. v. Whiting, 732 F.3d 1006, 1022

(9th Cir. 2013)). Field preemption is when Congress takes

exclusive control over a particular issue. Id. at 1114.

2

Although the carriers pay lip-service to this lesser merits standard, they

do not explain why they succeed under it.

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 11

Conflict preemption arises when state law conflicts with

federal law, such that “it is impossible for a private party to

comply with both state and federal law.” Id. (citations

omitted).

The carriers exclusively argue express preemption. 3

When a statute contains an express preemption clause, we

look only to the text “without any presumptive thumb on the

scale for or against preemption.” Cal. Rest. Ass’n v. City of

Berkeley, 89 F.4th 1094, 1101 (9th Cir. 2024) (citation

omitted). 4

“[T]he task of statutory construction must in the first

instance focus on the plain wording of the [preemption]

clause” and then consider “the surrounding statutory

framework[.]” Nat’l R.R. Passenger Corp. v. Su, 41 F.4th

1147, 1152 (9th Cir. 2022) (citations omitted). Our analysis

of the carriers’s express-preemption argument thus begins

with the Telecommunications Act’s text. Section 254(f)

preempts state regulations that are “inconsistent with” FCC

regulations and that are not “equitable and

nondiscriminatory.” We treat each in turn.

B

The Telecommunications Act allows states to “adopt

regulations not inconsistent with the [FCC]’s rules.” 47

U.S.C. § 254(f). The carriers argue that the CPUC rule is

3

We held that there was no conflict preemption the last time the carriers

challenged a CPUC rule vis-à-vis this very statute. See Picker, 970 F.3d

at 1117–20.

4

The presumption against preemption does not apply when there is an

express preemption clause, particularly as here where the statute is not

ambiguous. See Puerto Rico v. Franklin Cal. Tax-Free Tr., 579 U.S.

115, 125 (2016); see also R.J. Reynolds Tobacco Co. v. County of Los

Angeles, 29 F.4th 542, 553 n.6 (9th Cir. 2022).

12 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

“inconsistent with” the FCC’s rules because it differs from

them. They also explain that the FCC considered—and

ultimately rejected—a rule functionally equivalent to the

CPUC rule they now challenge.

1

To determine when a state regulation is “inconsistent

with” a federal regulation, we would normally start by

looking at the meaning of “inconsistent” at the time

Congress enacted the Telecommunications Act. But we are

not working from an entirely blank slate.

Although we have never interpreted § 254(f)’s use of

“inconsistent with,” in Metrophones Telecommunications,

Inc. v. Global Crossing Telecommunications, Inc., we

interpreted its use in 47 U.S.C. § 276(c), another provision

of the Telecommunications Act. 423 F.3d 1056 (9th Cir.

2005). We first explained that Congress’s use of

“inconsistent with” “signaled its intent not to occupy the

entire field.” Metrophones, 423 F.3d at 1072 (emphasis

added). We then concluded that when Congress uses the

term “inconsistent with” in an express preemption clause, its

meaning is “substantially identical to the analysis of implied

conflict preemption.” Id. at 1073. We thus concluded that

state law is only inconsistent with federal law if it “stands as

an obstacle to the accomplishment and execution of the full

purposes and objectives of Congress.” Id. (quoting Gade v.

Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98 (1992)).

And even then, we explained that state law was only

preempted “to the extent it actually interferes with the

methods by which the federal regulatory scheme was

designed to reach its goal.” Id. (citations and internal

punctuation omitted).

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 13

We could rest on Metrophones and conclude—as we did

there—that Congress’s use of “inconsistent with” merely

codifies what would otherwise be implied conflict

preemption. After all, “identical words and phrases within

the same statute should normally be given the same

meaning.” Does 1-6 v. Reddit, Inc., 51 F.4th 1137, 1143 (9th

Cir. 2022) (subsequent history and internal citations

omitted). Applied here, it would mean that whenever the

Telecommunications Act uses “inconsistent with,” it means

the same thing.

But we would reach the same conclusion even without

the helpful gloss in Metrophones because that interpretation

is also correct. At the time the Telecommunications Act was

enacted, “inconsistent” meant “[m]utually repugnant or

contradictory.” Inconsistent, BLACK’S LAW DICTIONARY

766 (6th ed. 1990). Under that definition, two ideas are

inconsistent only if they are “[c]ontrary, the one to the other,

so that both cannot stand, but the acceptance or

establishment of the one implies the abrogation or

abandonment of the other.” Id. Another definition required

“incompatibility of elements” or a lack of “agreement.”

Inconsistent, RANDOM HOUSE WEBSTER’S COLLEGE

DICTIONARY 660 (2d ed. 1997).

These contemporary dictionary definitions suggest that

the term “inconsistent” requires some level of mutual

exclusivity. This is the most intuitive reading. And if

dictionaries were not enough, the rest of the statute provides

helpful context, as it clarifies that state rules are allowed if

they “are paired with ‘specific, predictable, and sufficient

mechanisms’ that ‘do not rely on or burden Federal universal

service support mechanisms.’” WWC Holding Co. v. Sopkin,

488 F.3d 1262, 1277 (10th Cir. 2007) (quoting 47 U.S.C.

§ 254(f)). The statute’s prohibiting reliance on or the

14 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

burdening of federal funding mechanisms highlights

Congress’s key concern in allowing the states to set their

own rules for funding universal service within their borders.

The words Congress used reflect its desire for states to

ensure state-level universal service to best meet their unique

needs, but only if they do not harm the FCC’s efforts.

Our reading is also consistent with how “inconsistent” is

used in other areas of federal law. In Goldfarb v. Mayor and

City Council of Baltimore, the Fourth Circuit considered a

challenge brought under the Resource Conservation and

Recovery Act (RCRA) against “current and former owners

of an industrial property in Baltimore alleged to have been

contaminated by hazardous waste.” 791 F.3d 500, 502 (4th

Cir. 2015). The RCRA included an “anti-duplication

provision” with language remarkably like § 254(f). It

provided that if the Clean Water Act (CWA) regulated an

activity, that activity cannot also be regulated by the

RCRA—“except to the extent that such application (or

regulation) is not inconsistent with the requirements” of the

CWA, among other statutes. 42 U.S.C. § 6905(a).

Like us, the Fourth Circuit was required to determine

what it meant for the RCRA to be “inconsistent with” other

provisions of federal law. And like us, the Fourth Circuit

gave “inconsistent” “its ordinary dictionary meaning,”

ultimately concluding that “[t]o be ‘inconsistent’ for

purposes of § 6905(a), . . . the CWA must require something

fundamentally at odds with what RCRA would otherwise

require.” Goldfarb, 791 F.3d at 509–10 (collecting

dictionary definitions).

In a different challenge interpreting the same statute, the

D.C. Circuit faulted a party for claiming that something was

“inconsistent with” the Atomic Energy Act while being

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 15

“unable to point to any direct conflict between” the

challenged position “and any specific provision of the

AEA.” Edison Elec. Inst. v. EPA, 996 F.2d 326, 337 (D.C.

Cir. 1993). The carriers here face the same problem. They

rely on the undisputed point that the surcharge rule differs

from the FCC rule. But that is not enough.

Other examples establishing that “inconsistent” does not

mean “different” abound. The Supreme Court has explained

that “a later statute repeals former ones when clearly

inconsistent with the earlier enactments.” United States v.

Yuginovich, 256 U.S. 450, 463 (1921) (citing United States

v. Tynen, 78 U.S. (11 Wall.) 88, 93 (1870)). The

presumption thus recognizes that two statutes can differ

without the later-enacted statute destroying the former. It is

only when the two conflict that the former yields.

Likewise, parties are judicially estopped from taking

inconsistent litigating positions by litigating on one theory,

and then seeking “an inconsistent advantage by pursuing an

incompatible theory.” 18 C. Wright, A. Miller, & E. Cooper,

Federal Practice and Procedure § 4477, p. 782 (1981). Each

of these examples, and countless others, point in one

direction—“inconsistent” requires more than “different.”

The carriers provide no reason for us to afford § 254(f)’s

definition of “inconsistent” a different understanding from

the meaning we apply in other areas of federal law.

Moreover, the cases on which the carriers rely to redefine

“inconsistent” to mean “different” require more than mere

difference. One such case, Ecological Rights Foundation v.

PG&E Company, held that “inconsistent with” requires two

rules to be “mutually repugnant or contradictory, such that

the application of one implies the abrogation or

abandonment of the other.” 874 F.3d 1083, 1095 (9th Cir.

16 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

2017) (cleaned up). That undermines the carriers’s

argument.

Their other cited sources fare no better. Justice Scalia’s

partial concurrence in Decker v. Northwest Environmental

Defense Center, for example, explained that “whenever the

agency’s interpretation of the regulation is different from the

fairest reading, it is in that sense ‘inconsistent’ with the

regulation.” 568 U.S. 597, 617 (2013) (Scalia, J., concurring

in part and dissenting in part). But the next sentence—

omitted from the carriers’s briefing—explains that such

difference is “[o]bviously . . . not enough.” Id.

Thus, even the carriers’s cases require a rule to

undermine another for the two rules to be inconsistent. We

thus conclude that the Telecommunications Act’s use of

“inconsistent with” unambiguously requires abrogation or

abandonment of the federal rule.

2

Guided by our interpretation of “inconsistent with,” we

conclude that the carriers have failed to show a likelihood of

success on their claim that the access line rule is

“inconsistent with” the FCC rule. The FCC rule—imposed

on carriers for funding the federal universal service

program—says nothing about the funding of state universal

service programs. And the carriers concede that they cannot

prove impossibility preemption. That concession is fatal

given our conclusion in Metrophones that when Congress

uses “inconsistent with,” it invokes conflict preemption. But

even without that concession, the carriers’s arguments fail.

First, they argue that a state cannot evade preemption

simply by declaring that its own rule is best designed to

advance universal service. We agree, but that is beside the

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 17

point. A state, of course, could never adopt a rule that it

determined would harm universal service. But that speaks

more to their obligation under § 254(f) to advance universal

service than it does to their obligation to advance universal

service consistent with FCC rules.

Next, they argue that the rule undermines the FCC’s

explicit policy objectives of ensuring that universal service

support mechanisms are predictable, competitively neutral,

and easily administrable, while avoiding economic

distortions. In support, they cite the FCC’s consideration—

and ultimate rejection—of its own connections-based rule in

2012. At the time, the FCC declined to “create a definition

of ‘connection’ for purposes of moving to a new

connections-based contribution methodology” without first

obtaining industry-wide consensus. Universal Serv.

Contribution Methodology, 27 FCC Rcd. 5357, 5439, ¶ 226

(2012). But that decision does not impose a state-level

consensus requirement. What is good for the goose is not

always good for the gander. We agree with the D.C.

Circuit’s conclusion—to borrow from Judge Williams’s

summary—that the FCC can “act[] lawfully in rejecting”

one action without “each of the 50 states” being similarly

required to reject that action. Mozilla Corp. v. FCC, 940

F.3d 1, 95 (D.C. Cir. 2019) (Williams, J., concurring in part

and dissenting in part) (emphasis in original). As we

explained above, the relevant question is whether CPUC’s

adopting a connections-based rule would burden,

undermine, or rely on the FCC’s universal service efforts.

By rejecting an access line rule for funding federal universal

service programs, all that the FCC necessarily concluded

was that such rules would not work at the federal level.

California may conclude otherwise if it can do so without

harming the FCC’s efforts.

18 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

The carriers then argue that the new rule assesses

surcharges without distinguishing whether the underlying

services are surchargeable. They point to broadband, which

is unsurchargeable. But it is not clear that intrastate

broadband services are unsurchargeable. CPUC explains

that the prohibition on such surcharges was ephemeral—the

D.C. Circuit rejected the FCC’s “effort to kick the States out

of intrastate broadband regulation” and vacated its rule

prohibiting “any state or local requirements that are

inconsistent with [the FCC’s] deregulatory approach.”

Mozilla Corp., 940 F.3d at 74, 81.

The parties dispute whether the D.C. Circuit’s Mozilla

opinion, in vacating the preemption provision, vacated a

related FCC conclusion that “any state requirements to

contribute to state universal service support mechanisms that

might be imposed on such broadband Internet access

services would be inconsistent with federal policy and

therefore are preempted by section 254(f).” Protecting &

Promoting the Open Internet, 30 FCC Rcd. 5601, 5837

n.1477 (2015) (Open Internet Order). We have our

reservations about that conclusion given our holding that

“inconsistent with” mirrors the requirements of conflict

preemption. The Open Internet Order did not conduct a

statutory analysis of “inconsistent with” and did not

meaningfully address how states would undermine its efforts

by surcharging broadband. But we need not wade into that

controversy here.

At oral argument, CPUC explained that its definition of

access line is limited to voice telecommunications services,

meaning that it “does not and cannot surcharge broadband”

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 19

services. 5 Put differently, since CPUC does not surcharge

broadband qua broadband, there is no conflict even if the

FCC’s preemption-by-fiat were lawful. Thus, the continued

validity of the Open Internet Order’s preemption of

broadband universal service surcharges does not control our

analysis.

Finally, the carriers point to Metrophones. There, we

considered whether three state-law claims were preempted

by the Telecommunications Act. We concluded that the

implied-contract-in-fact and unjust-enrichment claims were

not preempted because they cleanly aligned with what the

FCC had done. 423 F.3d at 1076.

Things were different for the negligence claim. We held

that it was preempted because it sought to assign liability

differently from the FCC’s compensation rules. Id. at 1079.

By seeking to assign liability to one party where the FCC

assigned liability to another, the negligence claim in effect

was “inconsistent with” the relevant FCC regulations. But

far from providing the carriers harbor, our conclusion in

Metrophones only underscores the correctness of our

conclusion that two rules must be in conflict—

irreconcilable—for one to be “inconsistent with” the other.

5

Moreover, even if the carriers are correct that (1) the access line rule

surcharges broadband and (2) that states are preempted from surcharging

broadband services—a tall order—they face an additional hurdle. They

raise a facial challenge to the access line rule. But to answer “whether

the CPUC resolutions at issue . . . are facially preempted, we use the

‘rules that apply to facial challenges’ to statutes.” Picker, 970 F.3d at

1122 (quoting Puente Ariz. v. Arpaio, 821 F.3d 1098, 1104 (9th Cir.

2016)). Those rules require the carriers to show that there are “no set of

circumstances . . . under which the resolutions were valid.” Id. (cleaned

up). They cannot succeed on their facial claim because even if

broadband surcharges are preempted, the access line rule does not

otherwise conflict with FCC rules.

20 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

After all, if the FCC imposed liability on one party for an

action, a state law under which the other party would be

liable for the same action would directly conflict with the

federal law. Metrophones, while insightful, thus cuts against

the carriers’s preemption argument.

* * *

The access line rule differs from the FCC’s rule funding

interstate universal service programs. But the carriers have

not shown that it burdens those programs, and they have thus

failed to show that they are likely to succeed on their claim

that it is inconsistent with those rules.

C

We also reject the carriers’s claim that the surcharge rule

is preempted because it is inequitable and discriminatory

contrary to § 254(f). The FCC interpreted the “equitable and

nondiscriminatory” requirement to impose a “principle of

competitive neutrality.” In re Fed.-State Joint Board on

Universal Serv., 12 FCC Rcd. 8776, 8801 (1997).

In Picker, we recognized that neutrality means “that

universal service support mechanisms and rules neither

unfairly advantage nor disadvantage one provider over

another, and neither unfairly favor nor disfavor one

technology over another.” 970 F.3d at 1120 (internal

quotations omitted). The keyword there is “unfairly.” And

though we did not in Picker—and do not here—detail all the

ways a state could act unfairly to certain providers or

technologies, we explained that it would not be unfair for

regulators to treat “competitors whose circumstances are

materially distinct” differently. Id. (internal quotations

omitted). We thus recognized, albeit in different words, that

whatever else competitive neutrality requires, it “does not

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 21

require precise parity of treatment.” Rural Cellular Ass’n v.

FCC, 588 F.3d 1095, 1105 (D.C. Cir. 2009) (quoting TCG

New York, Inc. v. City of White Plains, 305 F.3d 67, 80 (2d

Cir. 2002)). Like our sister circuits, we conclude that

competitive neutrality “only prohibits [states] from treating

competitors”—and, by extension, technologies—

“differently in ‘unfair’ ways.” Id. at 1104.

1

Applying that principle, we conclude that the surcharge

rule is not unfairly discriminatory. The carriers argue that

they are harmed more than local exchange carriers. But the

access line rule treats “all customers (wireline, voice over

internet protocol, and wireless) regardless of service type”

the same and, if anything, is more equitable than the prior

rule, under which most of the surcharges came only from

ever-dwindling landline services. Assurance Wireless USA,

L.P., 2023 WL 2780365, at *3 (cleaned up). And it applies

to all carriers. Cf. Alenco Commc’ns, Inc. v. FCC, 201 F.3d

608, 623 (5th Cir. 2000) (“The Commission reasonably

applied the principle of equitable and nondiscriminatory

contribution by requiring contributions from all

telecommunications providers.”). Even if the carriers are

correct that they are more burdened by the surcharge rule

than others, that is only because they do not provide as many

landline services, and thus were disproportionately benefited

by the prior rule.

Nor is it dispositive that the carriers derive more than

75% of their wireless service revenues from unsurchargeable

broadband. As we have already explained, the carriers have

not shown a likelihood of success on their claim that

broadband is being surcharged at all. See supra at 18–19.

But more to the point, as CPUC clarified at oral argument,

22 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

the surcharge only applies to “voice telecommunication

services on a standalone basis” or, if bundled with other

services, the “connection to the voice telecommunication

service.” If most of the carriers’s services are not being

surcharged, it is hard to see how they are being unfairly

discriminated against by the access line rule. And, of course,

competitive neutrality “does not prohibit regulators from

according different treatment to competitors”—like local

exchange carriers and wireless providers such the carriers

here—“whose circumstances are materially distinct.”

Picker, 970 F.3d at 1120.

CPUC’s course correction, designed to “address the

sustainability of the state’s universal-service funding[] given

the decrease in revenue generated from landline services”

is—though far from the only possible response—a fair

response to a real problem. Assurance Wireless USA, L.P.,

2023 WL 2780365, at *9. In a world of ever-evolving

telecommunications technologies, competitive neutrality

must allow some play in the joints. To hold otherwise would

hamstring California’s ability to satisfy its statutory mandate

of providing universal service.

2

The carriers also argue that the rule treats providers who

receive support under the federal ACP—such as carriers

Assurance Wireless and MetroPCS—differently than those

who serve low-income participants in the California

LifeLine Program. 6 CPUC responds that the LifeLine

program and the ACP are not comparable and are funded

differently, that the relevant carriers could join LifeLine if

6

This argument was relegated to “a footnote in [the carriers’s] opening

brief” below. See id. at *9. Despite this inadequate briefing, we address

it on the merits as the district court did.

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 23

they wanted to, and that the prior rule also exempted

LifeLine while not exempting those enrolled in the ACP.

We agree with CPUC. The FCC recognizes that ACP is

“fundamentally different” than LifeLine. Rep. on the Future

of the Universal Serv. Fund, 2022 WL 3500217, at *22

(Aug. 15, 2022). The carriers are quick to point out that this

FCC decision was discussing the federal LifeLine program.

But they have no answer to CPUC’s showing that

California’s LifeLine program is based on the federal

program and so differences between ACP and LifeLine at

the federal level exist at the state level as well.

The carriers also try to refute CPUC’s showing that the

way the two programs, federal ACP and California’s

LifeLine, is relevant to whether they are “materially distinct”

for purposes of the discrimination inquiry. Picker, 970 F.3d

at 1120. Section 254 deals with the way that the FCC and

states fund their universal service programs. But neither the

FCC nor the states fund ACP—Congress does. Pub. L. No.

117-58, 135 Stat. 429, 1382 (2021). We disagree with the

carriers’s claim that the different funding mechanisms lack

legal significance. At the very least, the fact that Congress

funds ACP but not universal service shows that ACP’s

different treatment is not forbidden discrimination for

purposes of § 254(f). Further, only one member of a given

household is eligible for LifeLine benefits. Thus, it is

materially distinct from ACP. Given the differences

between LifeLine and ACP and that the relevant carriers can

always join LifeLine, the carriers’s claims fall short of

establishing a likelihood of success on their claim that the

rule is discriminatory and thus preempted. See Picker, 970

F.3d at 1120.

24 ASSURANCE WIRELESS USA, L.P. V. REYNOLDS

D

We also briefly note the preliminary nature of our

conclusions here. Our interpretation of what is required for

a state rule to be “inconsistent with” FCC rules or inequitable

and discriminatory, of course, should govern further

consideration on the merits. But “[w]e have repeatedly

emphasized the preliminary nature of preliminary injunction

appeals.” Ctr. for Biological Diversity v. Salazar, 706 F.3d

1085, 1090 (9th Cir. 2013). Thus, our legal conclusion on

what is required to show inconsistency says nothing about

what facts—if any—may arise in discovery.

While the carriers have not established a likelihood of

success on the merits of their claim that the CPUC rule is

actually “inconsistent with” FCC regulations or that it is

unfairly discriminatory or inequitable, they may be able to

as the case progresses. Factual development could change

the final analysis. Since the rule has been in effect for over

a year, the carriers may have new evidence about how the

new rule interacts with FCC rules in practice. If, for

example, the access line rule does surcharge broadband, the

district court will be able to conduct, in the first instance, an

analysis as to whether the FCC was acting within its

authority when it concluded that states were preempted from

surcharging broadband—guided by our interpretation of

“inconsistent with.” We express no opinion on that question,

nor do we prejudge how the fully developed factual record

may influence the merits.

E

Because the carriers have failed to establish a likelihood

of success on the merits, they cannot obtain a preliminary

injunction. We have explained that “[l]ikelihood of success

on the merits is the most important factor.” Azar, 911 F.3d

ASSURANCE WIRELESS USA, L.P. V. REYNOLDS 25

at 575 (cleaned up). And where, as here, a party fails to meet

this “threshold inquiry,” we are not even required to address

the other factors. Id. (citation omitted).

Likelihood of success on the merits is a necessary

precondition to injunctive relief. Here, that means that the

carriers cannot obtain injunctive relief even though we

conclude that they face irreparable harm. No matter how the

carriers respond to the surcharge rule, they face harms that

damages cannot remedy. As the district court explained, if

the carriers here pass on the surcharge to their customers,

they face a loss of goodwill and an injury to their pro-

consumer brands. See Disney Enters., Inc. v. VidAngel, Inc.,

869 F.3d 848, 865–66 (9th Cir. 2017). If, by contrast, the

carriers swallow the added access line costs, they will be

unable to recover those costs later from California because

of its Eleventh Amendment immunity. U.S. Const. amend.

XI.

But this irreparable harm does not help them. Their

failure to show a likelihood of success on the merits

precludes injunctive relief.

IV

The district court correctly concluded that the carriers

were unlikely to succeed on the merits. The surcharge rule

is not “inconsistent with” federal law, and it is neither

unfairly discriminatory nor inequitable. Because the carriers

have failed to show a likelihood of success or serious

questions on the merits, they cannot obtain injunctive

relief—regardless of the irreparable harm they face.

AFFIRMED.