Federal Court Bars FCC’s ‘Overreaching’ Promotion of Municipal Broadband

The Federal Communications Commission (“FCC”) operates under a statutory mandate “to remove barriers to broadband service and to promote competition in the telecommunications market.” To further that mission, it issued a Memorandum Opinion and Order on March 12, 2015 (FCC 15-25, Before the Federal Communications Commission, Washington, D.C. 20554, In the Matter of City of Wilson, North Carolina Petition for Preemption of North Carolina General Statute Sections 160A-340, et seq., The Electric Power Board of Chattanooga, Tennessee, Petition for Preemption of a Portion of Tennessee Code Annotated Section 7-52-601, WC Docket No. 14-115 and WC Docket No. 14-116) at the behests of a town in North Carolina and of a power-generating agency of the City of Chattanooga, TN (the “EPB”), looking to free them from Tennessee and North Carolina “laws either forbidding or putting onerous restrictions on” municipal efforts to offer broadband service in competition with private commercial providers. On August 10, 2016, the United States Court of Appeals for the Sixth Circuit (Cincinnati) struck down FCC 15-25, because its action – which the appellate court characterizes as “essentially serv[ing] to re-allocate decision-making power between the states and their municipalities” – oversteps the limits of FCC authority. (Assuredly, this is NOT how the FCC would describe what it was doing!) (STATE OF TENNESSEE (15-3291); STATE OF NORTH CAROLINA (15-3555), Petitioners; NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS, Intervenor, v. FEDERAL COMMUNICATIONS COMMISSION; UNITED STATES OF AMERICA, Respondents; ELECTRIC POWER BOARD OF CHATTANOOGA; CITY OF WILSON, N.C., Intervenors, Case 16a0189p.06, Nos. 15-3291/15-3555, UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT, 2016 U.S. App. LEXIS 14681; 2016 FED App. 0189P (6th Cir.); Argued, March 17, 2016; Decided, August 10, 2016; Filed, August 10, 2016 – from which the relevant quotations here are taken)

The restrictive laws in the two states permit – even encourage – municipal entities to build the infrastructure with which to offer broadband telecommunications services including cable, video, and Internet, but forbid their doing so beyond certain narrowly prescribed physical boundaries: either “the corporate limits of the city” or the utility’s service area. Many additional procedural, financial and administrative restrictions upon the wider dissemination of broadband service were also enacted by the states; consequently, “[b]oth Wilson and the EPB sought expansion because the private cable providers in their areas were unsatisfactory to the local residents and businesses.” Expansion would require the removal of those legal restrictions, and it is the power to do this that is being denied to the municipalities by the Sixth Circuit verdict.

Public reaction to the decision was immediate and highly polarized:

> Current (Republican) FCC Commissioner Mike O’Rielly: “I am heartened by the Sixth Circuit U.S. Court of Appeals’ decision. The FCC clearly tried to invoke imaginary authority and finally was called out by a court for doing so. Unless Congress specifically authorizes FCC intervention, States rightly can limit government-operated broadband networks.”

> Former (Democratic) FCC Commissioner Michael Copps: “Let’s be clear: industry-backed state laws to block municipal broadband only exist because pliant legislators are listening to their Big Cable and Big Telecom paymasters. These corporate providers invest in campaign contributions rather than in deploying high-quality broadband. This decision does not benefit our broadband nation. Nor is it a good reading of the law. But if the FCC cannot set aside these bad laws, then the people must. We will redouble our state-by-state efforts to repeal these odious policies.”

> Chairman of the Telecommunications Committee of the National Association of Regulatory Utility Commissioners: “The Court recognized the simple fact that nothing in the Telecommunications Act provides the FCC with the power to give authority to a State entity that is not granted by that State’s constitution or legislature.”

> Joshua Stager, policy counsel and government affairs officer for the New America Foundation’s Open Technology Institute: “Today’s ruling doesn’t change the fact that these laws were hurting communities in Tennessee and North Carolina. They were written by telecom industry lobbyists to protect incumbents like AT&T and Comcast from competition. Similar laws exist in other states, and they all need to go.”

> Deb Fischer, Republican member of the Senate Commerce, Science, and Transportation Committee: “Today’s Sixth Circuit Court ruling addressed the FCC’s brazen overreach on municipal broadband. States are best positioned to understand the unique needs of their citizens and protect taxpayers.”

> The National Association of Telecommunications Officers and Advisors: “[T]oday’s court ruling rejecting the FCC’s order preempting state laws that limit or restrict local governments from providing fast, affordable broadband service is lamentable. When private industry fails to step up to the plate and provide Internet services that will enable our communities to thrive in today’s fast paced and worldwide economy, local governments should have every option available to right this wrong.”

> U.S. Telecom Association President and Chief Executive Officer Walter McCormick: “Today’s decision is a victory for the rule of law. The FCC’s authority is not unbridled, it is limited to powers specifically delegated by the Congress, and it does not extend to preemption of state legislatures’ exercise of jurisdiction over their own political subdivisions.”

> Sen. Edward J. Markey (D., Mass.), Senate Commerce Committee: “Congress intended to provide the FCC the tools needed to encourage deployment of advanced telecommunications networks, and when states impose barriers to that very deployment, the FCC should act. I will continue to fight to ensure that local communities have the power to decide for themselves how to invest in their own telecommunications infrastructure.”

FCC Chairman Tom Wheeler is considering the agency’s options: Appealing the matter to the U.S. Supreme Court (which seems disinclined to review the case); seeking full en banc review by the Sixth Circuit; and/or asking Congress to grant the FCC unquestioned authority to effect these reforms.

Marc Palmer Kram

Marc Palmer Kram

Marc Palmer Kram, B.A., M.A., M.Phil., J.D. Senior Tax Analyst (Telecommunications) WOLTERS KLUWER/CCH TAX & ACCOUNTING, N.A. (2002 - present)

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