In the case of City of Paducah, Kentucky v. East Tennessee Telephone Company in 1912, the Supreme Court ruled on a dispute over telephone rates. The city had passed an ordinance setting maximum rates that could be charged by the phone company for its services. However, this was challenged by East Tennessee Telephone Company who argued that it violated their Fourteenth Amendment rights as it deprived them of property without due process and denied them equal protection under law. The court sided with the telephone company stating that while cities have power to regulate utilities within reasonable limits to protect public interest, they cannot set prices so low as to be confiscatory or prevent fair return on investment for utility companies. Therefore, if a rate is too low and does not allow a utility company to make any profit from providing service then it can be considered unconstitutional.

In the dissenting opinion for the case City of Paducah, Kentucky v. East Tennessee Telephone Company, Justice Holmes disagreed with the majority's decision that a city ordinance requiring telephone companies to obtain consent before installing poles and wires was unconstitutional. He argued that such an ordinance did not violate any constitutional rights as it merely regulated how businesses used public property rather than prohibiting them from doing so altogether. Furthermore, he contended that cities should have the right to control their own streets and protect their citizens' interests without interference from federal courts unless there is clear evidence of constitutional infringement or abuse of power. Thus, in his view, this case represented an unwarranted intrusion into local affairs by federal authorities which undermined municipal autonomy and self-governance.