Municipal Broadband Future Problematic, FCC State Preemption Order Nixed by U.S. Appeals Court

By Peter Bernstein August 12, 2016

For those of you who follow my various postings on TechZone360, you are hopefully aware of my interest in municipal broadband, aka “community broadband.” Without getting into the policy challenges for the moment, I must confess that I have been fascinated by the possibilities of municipalities either alone or through public/private partnerships extending broadband services to all citizens at reasonable cost and in a timely manner spanning several decades at this point, particularly here in the U.S. 

It should be added that the Federal Communications Commission (FCC), particularly under the leadership of current Chairman Tom Wheeler, has

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shared this interest, and has been somewhat aggressive on this front.  In fact, on several occasions he has cited the efforts by municipalities in Tennessee and North Carolina as examples of getting community broadband right.  However, there is a big HOWEVER. 

With roughly 20 states having laws restricting the rights of municipalities competing against private Internet Service Providers (ISPs), back in February 2015 the FCC, under Section 706 of the Communications Act, voted to use its authority and preempted Tennessee from enforcing laws that blocked municipalities from expanding outside of their jurisdictions.  Tennessee, carrying the water for other states, felt this was federal overreach and took the FCC to court saying that the Commission had no such statutory authority to preempt state law.  And, on August 10, the U.S. Court of Appeals Sixth Circuit, in a shot heard around the U.S., ruled in favor of Tennessee.  It was a black eye to say the least for the FCC, with possibly some major ramifications.

What the Court Ruled

Rather than put words in their mouth, here is what the Court said in its ruling.

“This preemption by the FCC of the allocation of power between a state and its subdivisions requires at least a clear statement in the authorizing federal legislation. The FCC relies upon Section 706 of the Telecommunications Act of 1996 for the authority to preempt in this case, but that statute falls far short of such a clear statement. The preemption order must accordingly be reversed."

It should be noted that there was a bit of a silver lining in the order’s language.

Our holding today is a limited one. We do not question the public benefits that the FCC identifies in permitting municipalities to expand Gigabit Internet coverage. Furthermore, we need not, and do not, address a number of legal issues debated by the parties, including(1) whether § 706 provides the FCC any preemptive power at all, (2) whether Congress, if it is clear enough, could give the FCC the power to preempt as it did in this case, (3) whether, if the FCC had such power, its exercise of it was arbitrary or capricious in this case, and (4) whether and to what extent the clear statement rule would apply to FCC preemption if a State required its municipality to act contrary to otherwise valid FCC regulations.

FCC Chairman Tom Wheeler 

There appears to be wiggle room.  For example, the FCC could go back to a Congress for clear authorization authority.  This seems to be a long shot of major proportion.  The current majorities in the House and Senate are very much opposed to the feds dealing with issues that the majority believes are best left to states.  Plus, given the toxic political environment Chairman Wheeler, a Democrat, has more than enough issues of contention with this Congress on things like net neutrality, privacy and even the funding of the FCC.  

I am not a betting person, or a lawyer. That said, it appears that the language of the ruling, which was in essence unanimous, because it is limited in its scope and the way it is worded, would make an appeal to the U.S. Supreme Court a real challenge assuming that court decided to put it on it calendar. 

Not surprisingly, Chairman Wheeler was not happy about the decision. In a public statement he commented:

 “While we continue to review the decision, it appears to halt the promise of jobs, investment and opportunity that community broadband has provided in Tennessee and North Carolina. In the end, I believe the Commission’s decision to champion municipal efforts highlighted the benefits of competition and the need of communities to take their broadband futures in their own hands.

“In the past 18 months, over 50 communities have taken steps to build their own bridges across the digital divide. The efforts of communities wanting better broadband should not be thwarted by the political power of those who, by protecting their monopoly, have failed to deliver acceptable service at an acceptable price. The FCC’s mandate is to make sure that Americans have access to the best possible broadband. We will consider all our legal and policy options to remove barriers to broadband deployment wherever they exist so that all Americans can have access to 21st Century communications.

“Should states seek to repeal their anti-competitive broadband statutes, I will be happy to testify on behalf of better broadband and consumer choice. Should states seek to limit the right of people to act for better broadband, I will be happy to testify on behalf of consumer choice.”

With Congress making noise about rewriting the Communications Act for the first time since 1996 to better reflect the realities of the Internet/broadband age, what can and will be done is a chapter to be written with no doubt a lot of bends in the road with no assurance anything will happen.  

One can only hope, and this is purely personal opinion, that policy makers can formulate a regulatory structure that goes back to the 1934 Communications Act, which established the FCC , and says all citizens should have access to communications services at reasonable rates.  While balancing the interests of public and private interests is always a messy affair, given what is at stake for the long-term interests of the U.S., based on universal access to ubiquitous and high-speed broadband networks and its direct correlation to economic vitality in a connected world, maybe it is time to codify this as a right and not a privilege.   We shall see!

Edited by Alicia Young
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